d. Calculate the following different elasticities:

i. A price increase from P2 to P10 causes quantity demanded to change from 80 units to 30 units. Calculate and interpret price elasticity of demand.

ii. Income increase by 10% results in quantity demanded increases by 5%. Calculate and interpret income elasticity of demand.

iii. Quantity of good B increases by 50% because of an increase in price of good A by 40%. Calculate and interpret cross elasticity of demand. 

iv. How would a firm manipulate the prices of goods in di-iii in order to maximize revenue and profits?

Answer rating: 100% (QA)

Lets calculate and interpret each elasticity i Price Elasticity of Demand PED textPED frac text change in quantity demanded text change in price Given ... View the full answer