Reference no: EM131004764
Sony, Inc. estimated the demand for its personal computers and computed these point elasticities: own price elasticity=5(in absolute value), cross price elasticity with software= -4, income elasticity 2.5, cross price elasticity with Toshiba laptops= 3.5. Indicate whether each of the following states are true or false, and explain your answers.
a) all else constant, a price reduction for Sony's personal computers will increase both the number of units sold and seller's total revenue
b) The cross price elasticity indicates that a 5% reduction in the price of Sony's personal computers, all else constant, will cause a 20% increase in software demand
c) Demand for Sony's personal computers is price elastic and SONY PCs are considered normal goods
d) Falling software prices, all else constant, will increase revenues received by sellers of BOTH Sony computers and software.
e) A 2% price reduction in Sony PC price would be necessary to overcome the effects of a 1% decline in income.
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Estimated the demand for its personal computers
: Sony, Inc. estimated the demand for its personal computers and computed these point elasticities: own price elasticity=5(in absolute value), cross price elasticity with software= -4, income elasticity 2.5, cross price elasticity with Toshiba laptops=..
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