Question
The CEO of Mainway Toys wants to increase total revenue for the firm and proposes a 10% decrease in the price of all toys. a.
The CEO of Mainway Toys wants to increase total revenue for the firm and proposes a 10% decrease in the price of all toys.
a. The price elasticity of demand for toys is 2.5. Is the demand for toys price elastic, unit elastic, or price inelastic?
b. Will the CEO's proposal to decrease all toy prices by 10% increase, decrease, or have no impact on total revenue for Mainway Toys? Explain.
c. Assuming the demand for Mainway Toys is linear, would further price decreases ever cause you to change your response in part (b)? Explain.
(5 points)
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Managerial Economics and Business Strategy
Authors: Michael R. baye
7th Edition
978-0073375960, 71267441, 73375969, 978-0071267441
