16. You are a manager in charge of monitoring cash flow at a company that makes photography...

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16. You are a manager in charge of monitoring cash flow at a company that makes photography equipment. Traditional photography equipment comprises 80 percent of your revenues, which grow about 2 percent annually. You recently received a preliminary report that suggests consumers take three times more digital photographs than photos with traditional film, and that the cross-price elasticity of demand between digital and disposable cameras is 0.2. In 2009, your company earned about $400 million from sales of digital cameras and about

$600 million from sales of disposable cameras. If the own price elasticity of demand for disposable cameras is 2.5, how will a 1 percent decrease in the price of disposable cameras affect your overall revenues from both disposable and digital camera sales?

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