Question
Suppose that you are a business consultant to a firm that is deciding whether it should cut its production of video games in half next
Suppose that you are a business consultant to a firm that is deciding whether it should cut its production of video games in half next year. The firm wants your advice to know whether this action will increase revenue. Knowing that the production of video games (V) and apps for mobile devices (A) both compete for labor, you estimate the demand function for video games to be V=3.5-PV+0.25PA+0.5I, where PV is the price of one video game, PA is the price of one mobile app, and I is income. Would you advise the firm to go with its plan or against it? Is there any additional information that would help you provide a definite answer?
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