Question
You are a manager in charge of monitoring cash flow at an online retailer that sells some of its own toys as well as some
You are a manager in charge of monitoring cash flow at an online retailer that sells some of its own toys as well as some from popular brands like Melissa & Doug. You recently received a preliminary report from your website sales that suggests the growth rate in your Melissa & Doug brand total sales have leveled off, and that the cross-price elasticity of demand between your own branded toys and Melissa & Doug toys is 1.7. In 2021, your company earned about $70,000 from sales of Melissa & Doug toys and about $60,000 from sales of your own branded toys. If the own price elasticity of demand for your own branded toys is -2.5, how will a 2 percent increase in the price of your own toys affect your overall revenues from both your own brand and your sales of Melissa & Doug branded toys?
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