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What percentage would sales of malarex change

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Reference no: EM132795466

You are the vice President of Vaccinex-a company that specializes in developing and manufacturing vaccines for developing countries. The price elasticity of demand for your most renown product-the Malaria vaccine (Malarex) is -2.5; the cross elasticity of demand for Malarex with respect to the price of another product -Flurex, is 0.75; the cross elasticity of demand for Malarex with respect to the price of another product-Zincplus, is -0.50; the income elasticity of demand for Malarex is 3.0; and the advertising elasticity of demand for Malarex is 1.0.

Answer the following questions based on this information.

a). If the price of Malarex were increased by 5%, by what percentage would sales of Malarex change?

b). If the price of Flurex were increased by 5%, by what percentage would sales of Malarex change?

c). If income in the geographical market area for Malarex increased by 5%, by what percentage would sales of Malarex change?

d). Suppose the firm that produces Flurex reduced the price of its product by 20%. If the firm that produces Malarex wants to maintain its sales, by what percentage must it reduce the price of its product.

e). Suppose that the firm that produces Flurex reduced the price of its product by 20%. If the firm that produces Malarex wants to maintain its sales, by what percentage must it increase advertising?

f). Suppose the price of Zincplus rises by 25%, at the same time that the price of Flurex falls sharply by 20%, incomes rise by 2% and advertising at Malarex has been cut by 10% to reduce cost. How would these changes affect the sales of Malarex?

Reference no: EM132795466

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