AGEC3333 Ag Prices --- Homework Chapter 3 Demand Elasticities and Related Coefficients Name: ID: 1. You have been hired to do some consulting for Big Red Lawn Tractor Specifically, they want you to advise them on how they should price their lawn tractors. You have been given the following data to make your analysis Year Units Sold Price of Main Price Per Unit Average Income of Buver Comrater 1999 12.000 $7.500 $60,000 $6,100 2000 14.000 57.100 $70.000 $7.000 Answer the following questions. For each, use the arc-clasticity formula. (a) Compute the own price elasticity of demand for this lawn tractor and explain your results. (d) Based on your estimated own price elasticity of demand ignore in this question the change in income and the change in the competitor's price), would you recommend that the company lower the price of this lawn tractor? (Assume that Big Red's goal is to maximize revenues.) Why? How much would total revenue change ir Big Red dropped the price 5%? 1