Question

Les Inc (CI) produces swers. The demand for Cl's swers (q, measured in 100 s of swers) depends on the price that they set for their swers ( p, measured in dollars), the average price of substitutes for their swers (ps

​ , also measured in dollars), and the average monthly disposable income in the market for swers ( Y measured in $1000 s). The current prices are p=$17 and ps
=$18, the current monthly demand for CI brand swers is q=22, and the current average monthly disposable income in the swers market is $4200. Furthermore, it is known that One month, the average monthly income in the swers market increases to $4500 and the average price of substitutes increases to $18.52 (from their original values). Under these conditions, if Cl raises the price of their swers by about (from its original vâlue), then demand will remain at its original level, and Cl 's revenue

Answer 1

The price elasticity of demand determines how a change in price affects demand and revenue. In this case, with a price elasticity of demand of zero, an increase in price will not affect demand or revenue.

Step-by-step explanation:

In this case, the demand for CI's swers depends on the price of the swers, the price of substitutes, and the average monthly disposable income. The demand function can be represented as q = f(p, ps, Y).

When the average monthly income in the swers market increases to $4500 and the average price of substitutes increases to $18.52, if Cl raises the price of their swers, the demand will remain at its original level. This implies that the price elasticity of demand is zero.

When the price elasticity of demand is zero, the increase in price will result in the same level of demand, meaning that revenue will also remain the same.