RE: Elasticity of demand 急

2009-10-20 10:06 pm

If Price Elasticity of Demand (Ed) = 0.75 (Inelastic),

Q1) you are sitting in a meeting to determine price strategy for your company. One of the management group is arguing for a price reduction as a way to sell more units and increase income. Is this a good suggestion? Why or why not?

Q2) What are the comparative consequences for the price and quantity transacted of a good if (i) the price of a conplementary good rises, (ii) the price of substitute good rises.

回答 (1)

用戶22404

2009-10-24 1:24 am

✔ 最佳答案

Q1)Demand is inelastic with elasticity of 0.75, if you lower the price by 1%, you can only increase quantity sold by 0.75%, therefore, the total income would be reduced. It is not a good suggestion.

Q2)(i) If the price of a complementary good rises, the demand on the good will be fallen, hence, price and quantity transacted would both be reduced.
(ii) If the price of substitute good rises, the demand on the good will be increased, hence the price and quantity transacted would both be risen.

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