Manning Inc., is the leading manufacturer of garage doors. Demand for residential garage door sales depends, of course, on the rate of new house building activity, which in turn depends on changes in income per capita. During the past year, Manning sold 10,000 garage doors at an average price of $1,500 per door. In the coming year, disposable income per capita is expected to increase from $32,000 to $34,000. Without any price change, Manning expects current-year sales to rise to 12,000 units.
a. Calculate the arc income elasticity of demand.
b. The company economist estimates that if the price of doors is increased by $100, they could sell 11,500 doors. What is the arc price elasticity and what would be the corn-pan) s revenue?
c. Should they raise the price even more?