Purchase Solution

Income Elasticity of Motorola Phones

Not what you're looking for?

Ask Custom Question

I have the following data about the demand for Motorola picture phones:

(own) price elasticity = -.12
cross-price elasticity with digital cameras = +3
income elasticity = +.15.

If the goal of Motorola was to increase total sales revenue (ignoring cost considerations), would it raise or lower its selling price? Why?

What would happen to the demand for Motorola picture phones if the price of digital cameras rose by 2%? Are the two goods substitutes or complements?

What would happen to the demand for Motorola picture phones if consumer income rose by 10%? Are picture phones a normal or an inferior good?

Purchase this Solution

Solution Summary

This explains the concept of income elasticity

Solution Preview

By decrease in price its dmand will increase but by less proportion as its price elasticity is inelastic -.12 . Thus there will be not be overall increase in sales revenue. It can slightly increase the prices which will increase the overall sales. More generally, whenever elasticity is less than one, and price is cut, sales revenue will decline along with the price. On the other hand, when elasticity is greater than one, and the price is cut, the sales revenue will ...

Purchase this Solution


Free BrainMass Quizzes
Economics, Basic Concepts, Demand-Supply-Equilibrium

The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.

Economic Issues and Concepts

This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.

Pricing Strategies

Discussion about various pricing techniques of profit-seeking firms.

Basics of Economics

Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.

Elementary Microeconomics

This quiz reviews the basic concept of supply and demand analysis.