Question
Suppose a firm sells two goods, Good A and Good B. Use the following information to answer the question below and calculate the price elasticity
Suppose a firm sells two goods, Good A and Good B. Use the following information to answer the question below and calculate the price elasticity od demand (Ed) for Good A?
Profit maximizing price of Good A = $6000
MC at profit maximizing level of output of Good A = $1200
MC at profit maximizing level of output of Good B = $400
Total revenue of Good A = $80000
Total revenue of Good B = $68000
Rothschild index of Good B = 0.6
Price elasticity of the market demand for Good B = -1.2
Use the elasticity coefficient calculated and the information provided, to calculate by how much the firm's total combined revenue will change if it decreases the price of Good A by 16%?
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