A firm generates its revenues from the sale of goods x and y. Annual revenues from good x and y are $10,000 and $20,000, respectively. If the price elasticity of demand for good x is −4.0 and the cross-price elasticity of demand between y and x is 2.8 then a 2 percent reduction in the price of good x will result in:
Answer a. an increase in total revenues of $520.
b. a decrease in total revenues of $520.
c. no change in total revenues.
d. a decrease in total revenues of $600.
e. None of the above.
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