URGENT - assignment

2008-01-07 12:27 am

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Question
As a manager, please recommend strategies that could be adopted to increase profits given the economy experienced substantial growth in the past few years.
The price elasticity of demand for personal computers is found to be -1.4
The income elasticity of demand for personal computer is +2.1 and ;
The cross price elasticity of demand for computers with respect to the price of the operating system is -0.9

回答 (1)

用戶22404

2008-01-08 12:50 am

✔ 最佳答案

As the income elasticity of demand for personal computers is larger than one (normal good), as long as the economy will be grown substantially and peoples' income keep increasing, the quantity sold will also keep rising.
However, as the economy is growing, the manager will have no need to cut price to boost the quantity sold. However, once the economy downturns, manager should cut the selling price to raise the quantity sold so as to increase revenue. ( This is true for good with larger than 1 in absolute term price elasticity).
As their cross price elasticity is negative, they are complementary goods. Thus, the manager can lower the price of operating system, thus stimulating the demand of operating system and personal computers, the revenue should also be increased.

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