Estimate that the price elasticity of demand

Assignment Help Business Economics

Reference no: EM131003018

As an analyst for the aircraft manufacturer Airbus aircraft (A), your job entails advising Airbus on pricing strategies regarding their aircraft. You estimate that the price elasticity of demand for Airbus aircraft is -0.80, while the cross elasticity of demand, with respect to the price of Boeing aircraft (B), is 0.50. In a bold move, Boeing announces plans to cut the price of its product by 10%. Desiring to "maintain the position of Airbus in the market," you are asked to recommend a price adjustment for Airbus just sufficient to offset the impact of Boeing's move on Airbus sales. What do you recommend? Show your work.

Reference no: EM131003018

Questions Cloud

What is the present worth of the payments if interest rate : Engineering company just purchased a new CAD software for $8,000 now and annual payments of $500 per year for 6 years starting 2 years from now for annual upgrades. What is the present worth of the payments if the interest rate is 6% per year? Please..

Determine arc price elasticity of demand based on projection : Mais Electrical Service, Inc., once the only provider of electrical repairs in Benton shire, is now facing intense competition from the many electric service firms that have been established over the years. As a result, the demand for electrical repa..

About eliminating the middleman and war by parker : After reading the article about eliminating the middleman and War by Parker, discuss how this allows higher profit. How is this helping people get affordable glasses? Is anyone else doing this? Do you think this is a good business model? Why or Why n..

The cost of protesting is the same for all citizens : Consider a country with 5 citizens, and let be the value that citizen i attaches to protesting. Suppose v1= 4 v2= 3 v3= 2 v4=1 v5=0. Assume that the cost of protesting is the same for all citizens and is , where m is the number of protestors (so that..

Estimate that the price elasticity of demand : As an analyst for the aircraft manufacturer Airbus aircraft (A), your job entails advising Airbus on pricing strategies regarding their aircraft. You estimate that the price elasticity of demand for Airbus aircraft is -0.80, while the cross elasticit..

Emerged from the war pessimistic-cynical and discouraged : Though no horrendous numbers, Americas too died in the trenches of France, and the experience of mass death transformed American society. The United States went into the war to "make the world safe for democracy" but emerged from the war pessimistic,..

Why are people risk-averse : Why are people risk-averse? Use your answer to throw light on the way in which intermediaries can persuade savers to lend their money indirectly to them for a lower average rate of return than they could obtain on their own. How does the degree of co..

How do bubbles challenge the classical theory of asset price : How do bubbles challenge the classical theory of asset prices? Are bubbles necessarily inconsistent with the absence of arbitrage opportunities? Explain in detail. What are the social costs of bubbles? How did Shiller test the classical theory? What ..

Calculate the price elasticity of supply for this producer : When the price of pine sawtimber in South Carolina increased from $30 per ton to $32 per ton, the quantity one producer supplied increased from 2000 tons per month to 2100 tons per month. Calculate the price elasticity of supply for this producer. Sh..

User Account

All Pages