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Sailright inc makes and sells sailboards

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Calculating the change in output

Sailright Inc. manufactures and sells sailboards. Management believes that the price elasticity of demand is -3.0. Currently, boards are priced at $500 and the quantity demanded is 10,000 per year.

A. If the price is increased to $600, how many sailboards will the company be able to sell each year?

B. The cross-price elasticity of demand between Sailright and its closest competitor is +2.25 and income elasticity of demand is +1.5. If income increases by 5% and its competitor reduces its prices by 10%, how much would Sailright have to change its prices to keep its total sales unchanged? Assume that price elasticity of demand is still -3.0.

 

Reference no: EM1327106

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