(i)“Shoes for kids” is a company producing kids shoes and has the demand function

 Q = 40 – 2P. Find the point price elasticity of demand when P = $4 price units and state what type of commodity this is at P=$4 and why.

(ii) As a promotional strategy, “Shoes for kids” reduces the prices of a range of its products. One such product is kids’ boots that were $9/ pair, now sell for $7/pair increasing sales from 400 to 600 pairs a month

(a)Show why this strategy has been so successful by calculating the price elasticity of these boots at a price of $9 and comment.

(b)What is the revenue increase from this strategy?

Answer rating: 100% (QA)

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