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The management of the Mini Mill Steel company estimated the following elasticities for a special type of steel : Ep=2, EI=1, EXY= 1.5 and X refers steel and Y refers aliminum. Next year the firm would like to increasethe price of the steelit sells by 6 percent. The management forecasted that income will rise by 4 percent next year and that the price of aliminum will fall by 2 percent.

(a) If the sales this year are 1.200 tons of the steel, how many tons can the firm expect to sell next year?

(b) by what percentage must the firm change the price of steel to keep its sales at 1.200 tons next year?

Microeconomics, Economics

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