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Unformatted text preview: 2.) Analysts at your firm have calculated that, at the current price, customer elasticity for your firms product is -0.7. The firm, like all firms, wants to make more money. The CEO has forgotten everything she learned in ManEc 387 and is relying on you to interpret the elasticity for her. Based on the elasticity of -0.7, should the firm raise or lower the price of its product (if it wants to increase revenue)? (2.5 pts) Since this is less than 1, they are in the inelastic range. Hence the firm should raise the price. The ration of -0.7 indicates that if it raises price by 10% sales will decline by 7% (hence the firm will make more money)....
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This note was uploaded on 12/03/2011 for the course MANEC 387 taught by Professor Crawford,l during the Fall '08 term at BYU.
- Fall '08