Answer the following to determine your knowledge of elasticity:
1. Mary is a manager at a local store and has the following data for two products:
The owner of the firm wants to maximize revenue for each product so she asks Mary to calculate the value of elasticity and she asks you - ace econ student - to calculate elasticity for both products and advice Mary which price to charge based upon your economics knowledge!
2. Compute the value of elasticity based upon the data in the table below:
| PRICE | QUANTITY |
|---|---|
| $ | |
| $ |
Advice the firm owner as to what to do with prices to increase revenue - should the firm raise prices to increase revenue or lower prices? Why?
3. Cross-price elasticity between robots and drones is - 2.5 when the price of drones drops. Explain what this means in terms of the relationship between the two products. The forecast is that the price of drones will keep dropping - what advice would you have for the robot maker? Why?