Determining the cross-price elasticity

Reference no: EM13967113

Cross-Price Elasticity

B. B. Lean is a catalog retailer of a wide variety of sporting goods and recreational products. Although the market response to the company's spring catalog was generally good, sales of B. B. Lean's $140 deluxe garment bag declined from 10,000 to 4,800 units. During this period, a competitor offered a whopping $52 off their regular $137 price on deluxe garment bags.

A. Calculate the arc cross-price elasticity of demand for B. B. Lean's deluxe garment bag.

B. B. B. Lean's deluxe garment bag sales recovered from 4,800 units to 6,000 units following a price reduction to $130 per unit. Calculate B. B. Lean's arc price elasticity of demand for this product.

C. Assuming the same arc price elasticity of demand calculated in part B, determine the further price reduction necessary for B. B. Lean to fully recover lost sales (i.e., regain a volume of 10,000 units).

Reference no: EM13967113

Questions Cloud

Earnings deliver significantly lower long-term profits : What did we learn from the Lepper and Green study of children at play? Do you agree that companies that spend the most time concentrating on quarterly earnings deliver significantly lower long-term profits? Defend your answer?

Conduct some independent research : Conduct some independent research and find one recent scholarly article about the subject of employee training and its impact on motivation.

What are the major restrictions of trans-border data flow : What are the major restrictions of trans-border data flow for U.S. multinational corporations and how firms can deal with these restrictions? What are the major challenges of managing a global telecommunications network and how firms can effectively ..

Which formulas are easiest to set up and calculate for you : What is your strategy for conquering the formulas that give you the most problems?

Determining the cross-price elasticity : B. B. Lean is a catalog retailer of a wide variety of sporting goods and recreational products. Although the market response to the company's spring catalog was generally good, sales of B. B. Lean's $140 deluxe garment bag declined from 10,000 to ..

About diagnosing poor performance problems : One of the many problems associated with employee appraisals is the subjectivity on the part of the evaluator that influences performance appraisal results. As an HR professional, how can you offset the challenges of performance rater subjectivity to..

Evaluate the fields franchising policy : We do not want to lose this quality by expanding through franchises. Rather, we prefer to maintain ownership of all units to ensure continued good service and quality." Evaluate the Fields franchising policy.

How many units must be sold to produce the maximum cost : Is there a maximum cost for your General Store? If so, how many units must be sold to produce the maximum cost, and what is that maximum cost?

Skybox has grown with employees in three waves : SkyBOX has grown with employees in three waves. Each wave came with it’s own set of issues. The programmers in the first two waves had left, so Tim offered equity to the third set. Unfortunately, .they did not have the skill sets to move in the direc..

User Account

All Pages