Required informationYou are the manager of a firm that receives revenues of $20,000 per year from product X and $80,000 per year from product Y. The own price elasticity of demand for product X is −3 and the cross-price elasticity of demand between products Y and X is −1.6. Suppose you increase the price of good X by 2 percent. Assume that the information about product X and product Y from the problem changed to the following: Revenues per year from product X$20,000Revenues per year from product Y$75,000Own price elasticity of demand for product X −3Cross-price elasticity of demand between products X and Y −1.5Price increase of product X (percent) 2 Instruction: Update the data in your spreadsheet to the values above and enter the recomputed answer for the original question.Required:How much will your firm’s total revenues (revenues from both products) change?Change in revenues: ____________________

Demand :Demand is when a consumer has the desire to buy something at the price that he is ready to…

Answered: Required information You are the…

ECON MICRO

5th Edition

ISBN:9781337000536

Author:William A. McEachern

Publisher:William A. McEachern

Chapter5: Elasticity Of Demand And Supply

Section: Chapter Questions

Problem 1.1P: (Calculating Price Elasticity of Demand) Suppose that 50 units of a good are demanded at a price of...

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Required information

You are the manager of a firm that receives revenues of $20,000 per year from product X and $80,000 per year from product Y. The own price elasticity of demand for product X is −3 and the cross-price elasticity of demand between products Y and X is −1.6. Suppose you increase the price of good X by 2 percent.

Assume that the information about product X and product Y from the problem changed to the following:


Revenues per year from product X	$	20,000
Revenues per year from product Y	$	75,000
Own price elasticity of demand for product X		−3
Cross-price elasticity of demand between products X and Y		−1.5
Price increase of product X (percent)		2

Instruction: Update the data in your spreadsheet to the values above and enter the recomputed answer for the original question.

Required:

How much will your firm’s total revenues (revenues from both products) change?

Change in revenues: ____________________

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