Demand for personal computers (PCs) can be characterized as point elasticity as follows: Price elasticity = -5, cross-price elasticity with software = -4, and income elasticity = 2.5. Whether the statements written in points a, b, c, and d below are true or false, and are accompanied by a description / explanation / calculation that supports your opinion. A. Decreasing PC prices will increase the demand for PCs and will also increase total revenue. B. The value of cross-price elasticity above indicates that a 5% decrease in PC price will lead to a 20% increase in software demand. C. Demand for PC is price elastic and PC is normal good. D. A decrease in software prices will increase the income received by PC sellers and software sellers.

Demand for personal computers (PCs) can be characterized as point elasticity as follows: Price elasticity = -5, cross-price elasticity with software = -4, and income elasticity = 2.5. Whether the statements written in points a, b, c, and d below are true or false, and are accompanied by a description / explanation / calculation that supports your opinion. A. Decreasing PC prices will increase the demand for PCs and will also increase total revenue. B. The value of cross-price elasticity above indicates that a 5% decrease in PC price will lead to a 20% increase in software demand. C. Demand for PC is price elastic and PC is normal good. D. A decrease in software prices will increase the income received by PC sellers and software sellers.

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter6: Simple Pricing

Section: Chapter Questions

Problem 10MC

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