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(a) A manufacturer sells two products, A and B and had raised the prices of the two products recently to cover the higher production costs.

(a) A manufacturer sells two products, A and B and had raised the prices of the two products recently to cover the higher production costs. The price and quantity for each product before and after the price change is given in the table below.

Calculate the price elasticity of demand for both products using the midpoint method. Comment on their elasticities and explain two (2) possible reasons why they are different. What should the manufacturer do to the prices of the two products if the objective is to earn more revenue?

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Product Initial Price Initial Quantity New Price New Quantity demanded demanded A $250 280 $300 200 B $600 50 $750 45

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