You are the manager in charge of monitoring cash flow at a company that makes photography equipment.Traditional photography equipment comprises 80 percent of your revenues, which grow about 2 percent annually.You recently received a preliminary report that suggests consumers take three times more digital photographs than photos with traditional film, and that the cross-price elasticity of demand between digital and disposable cameras is -0.2.In 2009, your company earned about $400 million from sales of digital cameras and about $600 million from sales of disposable cameras.

Using the information above, if the own price elasticity of demand for disposable cameras is -2.5, how will a 1 percent decrease in the price of disposable cameras affect your overall revenues from both disposable and digital camera sales?In your answer compute:

a. The change in revenues in dollars from the resulting sale of disposable cameras after the 1 percent decrease in

the price of disposable cameras.

b. The change in revenues in dollars from the resulting sale of digital cameras after the 1 percent decrease in the

price of disposable cameras.

c. The total effect on sales for the company after the 1 percent decrease in the price of disposable cameras.