Managerial Econ

The Haas Corporation’s executive vice president circulates a memo to the firm’s top
management in which he argues for a reduction in the price of the firm’s product. He
says such a price cut will increase the firm’s sales and profits.
a. The firm’s marketing manager responds with a memo pointing out that the price
elasticity of demand for the firm’s product is about -0.5. What is this fact
relevant?
b. The firm’s president concurs with the opinion of the executive vice president. Is
she correct?
3. In the following diagram, we show one of Jane’s indifference curves and her budget line.
a. If the price of good X is $100, what is her income?
b. What is the equation for her budget line?
c. What is the slope of her budget line?
d. What is the price of good Y?
e. What is Jane’s marginal rate of substation in equilibrium?

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