Asked by Grace Mackosso on Jun 01, 2024
Verified
You own two different energy drink brands with similar elasticities: "Blue Cow" and "600 minute energy." If you reduce the price on "Blue Cow",you can only increase your total sales if
A) Prices for "600 minute energy" are increased
B) Prices for "600 minute energy" are reduced
C) Prices for "600 minute energy" stay constant
D) None of the above
Elasticities
A measure of how much the quantity demanded or supplied of a good responds to a change in one of its determinants, such as price or income.
Total Sales
The aggregate revenue received from selling goods or services over a given period of time.
- Understand the effects of price changes on consumer demand and sales in multi-product contexts.
- Grasp the implications of product complements and substitutes on pricing and marketing strategies.
Verified Answer
ZK
Zybrea KnightJun 03, 2024
Final Answer :
B
Explanation :
If the price of Blue Cow is reduced, it is likely that consumers will switch from 600 minute energy to Blue Cow since their elasticities are similar. However, if the price for 600 minute energy is also reduced, consumers may still choose to purchase 600 minute energy instead of Blue Cow. Therefore, reducing the price for Blue Cow while keeping the price for 600 minute energy constant, or even increasing it, would likely result in an increase in total sales.
Learning Objectives
- Understand the effects of price changes on consumer demand and sales in multi-product contexts.
- Grasp the implications of product complements and substitutes on pricing and marketing strategies.