Level-Mow, Inc. manufactures a highly reliable riding lawnmower. Level-Mow currently sells 1200 units per month at a current price of $1,900.
a. Its main competitor, Super-Cut, Inc. has just lowered the selling price of its comparable model from $1,000 to $800. If the arc cross price elasticity of demand between the two mowers is .818 over the range of the proposed price cuts, then what will be the new quantity of lawnmowers sold by Level-Mow, Inc.?
b. Assume that Super-Cut, Inc. has completed its price reduction mentioned in part a above. If Level-Mow now wants to counter Super-Cut's price reduction with one of its own, then to what price must Level-Mow go in order to return to its original volume of 1200 units?

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The Answer of Level-Mow, Inc. manufactures a highly reliable riding lawnmower. Level-Mow currently sells 1200 units per month at a current price of $1,900.
a. Its main competitor, Super-Cut, Inc. has just lowered the selling price of its comparable model from $1,000 to $800. If the arc cross price elasticity of demand between the two mowers is .818 over the range of the proposed price cuts, then what will be the new quantity of lawnmowers sold by Level-Mow, Inc.?
b. Assume that Super-Cut, Inc. has completed its price reduction mentioned in part a above. If Level-Mow now wants to counter Super-Cut's price reduction with one of its own, then to what price must Level-Mow go in order to return to its original volume of 1200 units?