ZPharma Co., a pharmaceutical company, sells three different products:

Zdiet, a Weight Loss Medication, Zataflam, a Non-Steroidal Anti-Inflammatory and Zolymox, an Antibiotic. Due to a new government regulation regarding pricing medications, suppose that the prices of these products have increased as follows: Zdiet (25%), Zataflam (20%) and Zolymox (10%). As a result, the monthly quantity sold from each product declined by the following percentages: Zdiet (35%), Zataflam (12%), and Zolymox (5%).

Questions

A. Calculate the price elasticity of demand for the three products: Zdiet, Zataflam and Zolymox.

B. Interpret your results to the best of your ability.

C. Analyze the potential effect of the increase in prices on sales revenue of each product.

D. Now, suppose the decline in demand indicated above was caused by a 20% decrease in income level. How would you best describe each product?