Explore BrainMass

Explore BrainMass

    Calculating the needed change in price of own product

    Not what you're looking for? Search our solutions OR ask your own Custom question.

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    XYZ Corporation is a manufacturer of widgets. Over the past several months, it has been selling its widgets for $100 each and unit sales have averaged 5,000 units per month. This month its competitor, ABC, Inc. raised the price of its widgets from $100 to $110. XYZ noted that its unit sales increased by 200 units.

    A. What is the cross price elasticity of demand between XYZ's and AB C's widgets?
    B. Knowing that the price elasticity of demand for its widgets is -2.0, what price would XYZ be able to charge and still sell 5,000 widgets, assuming ABC keeps its price at $110?

    © BrainMass Inc. brainmass.com March 5, 2021, 12:22 am ad1c9bdddf
    https://brainmass.com/economics/elasticity/calculating-needed-change-price-own-product-503158

    Solution Preview

    XYZ Corporation is a manufacturer of widgets. Over the past several months, it has been selling its widgets for $100 each and unit sales have averaged 5,000 units per month. This month its competitor, ABC, Inc. raised the price of its widgets from $100 to $110. XYZ noted that its unit sales ...

    Solution Summary

    Cross price elasticity of demand helps a firm to decide price of its own product in response to the changes in competing product prices. Solution to given problem depicts the steps to calculate the cross price elasticity of demand. It also calculates the required change in own price so that sales do not drop.

    $2.49

    ADVERTISEMENT