Full question:
Suppose Microsoft announces it is cutting the prices of some of its software titles (mainly games) by 25 percent. Assuming that Microsoft is seeking to increase revenues, it must believe that the elasticity of demand for these products is
a. elastic.
b. inelastic.
c. of unitary elasticity.
d. perfectly inelastic.
Answer:
Assuming that Microsoft is seeking to increase revenues, it must believe that the elasticity of demand for these products is elastic.
Step-by-step explanation:
The elasticity of demand encourages companies to prognosticate variations in demand based on different factors including fluctuations in price and the market entrance of competitive goods.
Elastic demand is one in which the transition in quantity needed due to a variation in price is large. Products with familiar replacements manage to possess elastic demand. If the elasticity outcome is higher than or similar to one, the demand is supposed to be elastic. Patterns of elastic goods carry clothing or electronics