LYFEN is considering adding another fruit-based product for which the demand has been estimated by the function
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Question:
- LYFEN is considering adding another fruit-based product for which the demand has been estimated by the function Q = 7500 – 500PF +7I + 100PB, where PF is the price of LYFEN's proposed product, I is per capita income, and PB is the price of a similar product from one of the competing companies. Assume the initial values of PF, I, and PB are 60, ¥9,500, and 40. Given this information, answer the following based on your calculations of appropriate elasticities.
- What effect would a price increase have on the total revenues earned from the proposed product? (10%)
- What would you expect to occur to sales given an increase in personal income? (10%)
- What is the potential impact if the competing seller raises its price? (10%)
Related Book For
Microeconomics
ISBN: 9781464146978
1st Edition
Authors: Austan Goolsbee, Steven Levitt, Chad Syverson
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