Question 14 (1 point)

Firm X's product has a cross-price elasticity of demand with a competitor's product of 0.65. The competitor lowers price of its good by 7%. Compute the % change in units sold for Firm X if it does not change the price of its product. Next, compute the price cut Firm X would need to enact in order to exactly offset the drop in units sold caused by the competitor's price cut (so there would be no change in actual units sold). If Firm X faces a price elasticity of demand of -2.2, then Firm X must lower its price by ______ (with rounding).

Question 14 options:

a)

2.1%

b)

1.2

c)

3.7

d)

4.8