Answer to Question #186308 in Microeconomics for fahmida

Question

a) What does an IED of 2.3 mean?  b) What does a CED of -0.5 mean? 

c)You are the owner of a multinational corporation. You produce insulin for diabetic patients and black markers  among the wide range of products that you produce. If you had to raise your revenue from selling insulin and  black markers, what would you do? Why? 

Answer 1

a) An IED of 2.3 mean, that the product is a normal good.

b) A CED of -0.5 mean, that the goods are complements.

c) If you had to raise your revenue from selling insulin and black markers, then you should increase the prices, because such products have inelastic demand.