Answer to Question #82328 in Macroeconomics for muhammad UZair

Question

13-According to a study, the price elasticity of shoes in the United States is 0.7, and the income
elasticity is 0.9.
a. Would you suggest that the Brown Shoe Company cut its prices to increase its revenue?
b. What would be expected to happen to the total quantity of shoes sold in the United
States if incomes rise by 10 percent?.

14. A book store opens across the street from the University Book Store (UBS). The new store
carries the same textbooks but offers a price 20 percent lower than UBS. If the cross-price
elasticity is estimated to be 1.5, and UBS does not respond to its competition, how much of
its sales is it going to lose?

Answer 1

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