1. The cross elasticity of demand is:
"Ed = \\frac {600 - 500} {22000 - 25000}\u00d7\\frac{22000 + 25000} {600 + 500} = -1.42."
So, these goods are complements.
2. If the firm drops the price to Birr. 2.50, it wouldn't be beneficial, because the demand is inelastic.
3. This would be beneficial, because as the demand is inelastic, the total revenue would increase.
Comments
Leave a comment