Question
2. Quiet headphones. Two years ago, Quiet headphones were priced at $44 and 200,000 units were sold. Last year, the price was lowered to $40
2. Quiet headphones. Two years ago, Quiet headphones were priced at $44 and 200,000 units were sold. Last year, the price was lowered to $40 and sales increased to 225,000.
(a) Estimate the value of the demand elasticity.
(b) Based on your estimate of the demand elasticity, how many units would you expect to be sold if price were lowered by an additional $1?
(c) In order to increase profits, should price be lowered below $40? If your answer begins as it should! with "it depends," indicate as clearly as possible what additional information you would need and how you would base your answer on such additional information.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started