The CEO of a firm producing computer peripherals is considering lowering the

prices of two of its products. The CEO is between lowering the price for the

computer keyboard or the cordless mouse. Last time prices were lowered, a 4

decrease in price for the 30 keyboard resulted in a growth in keyboard sales

from 150 thousand to 200 thousand per month. A 5 decrease in the price of

the 34 cordless mouse increased sales from 80 to 150 thousand cordless

mouses per month.

(a) Calculate the price elasticity of demand for the computer keyboard

(show all calculations).

(b) Calculate the price elasticity of demand for the cordless mouse (show

all calculations).

(c) Which product should he choose to put on sale? Explain your

answers with reference to the elasticity calculations in (a) and (b)

above AND the application of the total revenue test.