If a industry wants to raise total sales revenue

Reference no: EM1328503

Predictions about demand based upon given elasticities

Suppose the demand for beer is characterized by the following point elasticities:
own price elasticity = -2.5
cross-price elasticity with soda = +3
income elasticity = +2

Based on the given elasticities, answer the following. Explain your answers.

a. If a firm in the industry wishes to increase total sales revenue (ignoring cost considerations), will it raise or lower its selling price? Why?

b. What happens to the demand for beer if the price of soda falls by 2%? Explain your answer.

c. What happens to the demand for beer if consumer income rises by 5%? Be specific.

d. Is beer a normal or inferior good? Explain.

Reference no: EM1328503

Questions Cloud

Optimizing operations in a global environment : Does optimizing operations in a global environment work at cross-purposes to the traditional domestic perspective of organizational well-being?

Factors observed while defining the size of team : Detail a factor that needs to be critically observed while defining the size of a team.

Two different opinions in death penalty : These two are in debate over this particular subject but I cannot seem to decide who provides the best argument and why?

Explain expanded html : Explain Expanded HTML and Two paragraphs of text related to course content

If a industry wants to raise total sales revenue : If a industry wants to raise total sales revenue. What happens to the demand for beer if the price of soda falls.

Explaining the commerce clause and spending clause : Has the Court's use of the commerce clause to pass legislation gotten out of control? Are there any limits to what Congress can do under the commerce clause? Are there any cases that are not legitimately commerce clause cases?

Forward and future contracts : Mike Lane will have $5 million to invest in five year U.S. Treasury bonds three months from now. Describe what action lane should take using five-year U.S. Treasury note futures contracts to protect against declining interest rates.

Describe about supply chain managment : Explain your approach to effecting a win-win negotiation with a potential long-term supplier for a specific product or service.

Evaluating contention sometimes leadership is irrelevant : Evaluate the contention that sometimes leadership is irrelevant. Give detailed explanation of organizational culture and the impact leaders have on organizational culture.

User Account

All Pages