Suppose a firm sells two goods, Good A and Good B. Use the following information to answer questions that follow:

Profit maximizing price of Good A = R6000

MC at profit-maximizing level of output of Good A = R1200

MC at profit-maximizing level of output of Good B = R400

Total revenue of Good A = R80000

Total revenue of Good B = R68000

Rothschild index of Good B = 0.6

Price elasticity of the market demand for Good B = -1.2

2.1. Calculate the price elasticity of demand (Ed) for Good A.

Ed of Good A =__________________

2.2 Suppose that the firm noticed that when it increased the price of Good A from R4000 to R6000, the sales of Good B decreased from 8000 to 2000 units. Calculate and classify the cross-price elasticity of demand between Good A and Good B.

Ec =______________;___________(2 marks)

1. Good A and Good B are classified as (substitutes/compliments)__________________

2.3. Use the elasticity coefficient calculated above 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%?

Change in combined total revenue = R________________; R________________(2 marks)

2.4 Calculate the mark-up and the profit-maximizing price that the firm should change for Good B.

Mark-up =_______________________

Price = R ____________________

2.5. Suppose the firm wishes to increase its sales of Good B by 12%. Calculate by how much (in %) the firm should change the price of Good B to achieve this objective?

Percentage change in price =_________________%