The marketing department of a firm that manufactures small vehicles has determined the following demand function for their cars.

a. If Pv = $10,000, Pc = $8,000, I = $25,000, and A = $300,000, then find the the price elasticity of demand.
b. Is the price elasticity of demand elastic, unitary elastic or inelastic? Why? If the firm increases price, what will happen to total revenue?
c. Assuming the variable values given in Part A above, determine the income elasticity. Interpret your answer.
d. Find the cross price elasticity of demand between the two vehicles. Interpret your answer.

Question

The marketing department of a firm that manufactures small vehicles has determined the following demand function for their cars.
  
a. If Pv = $10,000, Pc = $8,000, I = $25,000, and A = $300,000, then find the the price elasticity of demand.
b. Is the price elasticity of demand elastic, unitary elastic or inelastic? Why? If the firm increases price, what will happen to total revenue?
c. Assuming the variable values given in Part A above, determine the income elasticity. Interpret your answer.
d. Find the cross price elasticity of demand between the two vehicles. Interpret your answer.

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The Answer of The marketing department of a firm that manufactures small vehicles has determined the following demand function for their cars.
  
a. If Pv = $10,000, Pc = $8,000, I = $25,000, and A = $300,000, then find the the price elasticity of demand.
b. Is the price elasticity of demand elastic, unitary elastic or inelastic? Why? If the firm increases price, what will happen to total revenue?
c. Assuming the variable values given in Part A above, determine the income elasticity. Interpret your answer.
d. Find the cross price elasticity of demand between the two vehicles. Interpret your answer.

The Marketing Department of a Firm That Manufactures Small Vehicles