As such, when evaluating the change in profit, we need to consider both alternatives and how the possible responses from the competitor will affect it. In the first case, with no response from the competitor, as I have mentioned previously, net sales are likely to increase due to positive price elasticity. In order to evaluate whether the net revenue is modified, we should use a figure example, considering the quantity sold
100 and price P = 10. The total net sales is 1000. On a 10% price cut (P = 9), we should estimate the quantity Q. At 115 (it shouldn't go up to 25%). As such, the net sales will be V = 1035, an increase of 35 units or 3.5%.
In the second scenario, the price cut will implicate a response from the competitor. The quantity will initially increase, only to later decrease after...
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Economics Problem Coca-Cola in dispensers located on a golf course sells for $1.25 a can, and golfers buy 1,000 cans. Assume the course raises the price to $1.26 (assume a penny raise is possible) and sales fall to 992 cans. Using the midpoint formula, what is the price elasticity of demand for Coke at these prices? Assume the demand for Coke is a linear line. Would the elasticity of demand be elastic or inelastic
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