Suppose that you are currently charging a price of $30. You know that at your current...
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Suppose that you are currently charging a price of $30. You know that at your current price, income elasticity is equal to 1.5 and price elasticity equals -2. If you see a 25% decrease in income, calculate the price change required to maintain your current sales level. Note: you must fully derive all the steps of your calculations including that %ChangeQ=ep*%changeP+ el*%changel (must proof this result! See lecture hint!) Applying formulas will NOT give you full credit for the question. Make sure you also interpret your results. Suppose that you are currently charging a price of $30. You know that at your current price, income elasticity is equal to 1.5 and price elasticity equals -2. If you see a 25% decrease in income, calculate the price change required to maintain your current sales level. Note: you must fully derive all the steps of your calculations including that %ChangeQ=ep*%changeP+ el*%changel (must proof this result! See lecture hint!) Applying formulas will NOT give you full credit for the question. Make sure you also interpret your results.
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