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suppose a firm produces x and y, the firm earns revenues from x=$50000 and revenues from...

suppose a firm produces x and y, the firm earns revenues from x=$50000 and revenues from y equal to $ 30000. the own price elasticity of demand for x is -2 and the cross price elasticity of demand between x and y is -0.6. if the firm lowers the price of product x by 1%, the change in the total revenues will be $?

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Answer #1

The formula for change in total revenue is given by

Change in total revenue = (PxQx*(1 + edx) + PyQy*ey) * percentage change in price

= (50000*(1 – 2) + 30000*-0.6)*(-1%)

= 680

The answer is $680.

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