Question

In: Economics

1- At $87 , a firm can sell 4,510 stereo earphones (3.5 mm for android). At...

1- At $87 , a firm can sell 4,510 stereo earphones (3.5 mm for android). At this price, elasticity is estimated at 2.4. What is the change in total revenue (+ or -) if the firm drops price by 9%? Round your answer to the nearest dollar.

2 - At $178, a firm can sell 18,985 stereo earphones (3.5 mm for android). These are premium earphones, guaranteed for 5 years. At this price, elasticity is estimated at 0.5. What is the change in total revenue (+ or -) if the firm drops price by 11%?

Expert Solution

a.) In this question, P₁= $87, Q=4510, elasticity, e=2.4, Price dropped by 9%

We know that

or

Now Total revenue earlier was (TR)= P.Q=(87).(4510)=392370

Change in Quantity,

[Here new means after price change, and old means before price change]

Also,

Therefore Change in total revenue is

b.) Proceeding in a similar manner

Rahul Sunny answered 2 years ago

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