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John Smith, C.E.O. of A.B.Co. is attempting to estimate the quantity of his product that will be demanded during April. At the current price of $2.00, A.B. Co. is selling 100,000 units per month. Mr. Smith has been informed that on April 1st, Delta Co., a producer of a substitute good, will be decreasing the price of its product by 10%. Given a cross elasticity of 2, answer the following questions. 

A) How many units can Smith expect to sell during April?

B) If Mr. Smith wants to maintain his current sales of 100,000 units, to what level should he change his price?

Macroeconomics, Economics

  • Category:- Macroeconomics
  • Reference No.:- M9678105

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