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Mayora Group which is engaged in the consumer goods sector has now successfully penetrated the international market. Last year, Mayora successfully recorded an increase in
Mayora Group which is engaged in the consumer goods sector has now successfully penetrated the international market. Last year, Mayora successfully recorded an increase in exports it's product, Beng-beng to Russia with numbers reaching 1.000 containers. In order to keep Russian market growing Mayora market research team has been identified Beng-beng inverse demand function = 1,000 15 + 5 0.2 + 0.002 where Q is the number of product sold per week (in thousands units) and is the price of Beng-beng, is the price of other product, M is the average income and expenditure in advertising. If it is known that the price of Beng-beng is RUB 26, the price of other product RUB 29, while average income per week is RUB 4,000, and for advertising budget is estimated around RUB 250,000. a. Mayora have a plan to increase the price of Beng-beng to $28, however, they afraid it would reduce their total revenue. What would you suggest to Mayora regarding to their plan? Give a proper calculation to support your justification (hint: use own price elasticity of demand) b. If product Y is expected to reduce it price by 5%, while all other factors affecting the demand for Beng-beng remaining the same, how this situation would affect Beng-beng demand in Russian market. (hint: use cross-price elasticity of demand)
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