I need help with an economics assignments: Calculate the arc income elasticity of demand.
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Manning, Inc. is the leading manufacturer of garage doors. ;Demand for residential garage door sales depends, of course, on the rate of new home building activity, which, in turn, depends on changes in income per capita. ;During the past year, Manning sold 10,000 garage doors at an average price of $1,500 per door.
In the upcoming year, disposable income per capita is expected to increase from $32,000 to $34,000. ;Without any price change, Manning expects upcoming year sales to rise to 12,000 units.
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- Given this information:
- Calculation: Calculate the arc income elasticity of demand.
- Arc Price: The company economist estimates that if the price of doors is increased by $100 per door, they could sell 11,500 doors. What is the arc price elasticity, and what would be the company’s revenue?
- Prices: Should Manning raise the price even more? If so, to what amount? If not, why not?