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Q. a) As an economist in a large company selling electrical appliances, you consider a policy to reduce the selling cost of electrical appliances hoping that there will be an increase in the quantity of appliances sold, leading to an increase in total revenue. You know that the cost elasticity of demand is -1. Will you opt for this pricing policy?
b) ‘Depreciation in the value of the Japanese currency in relation to the US dollar does not allow the Japanese firms to sell more in the USA marketplace'. Do you agree with this statement? Argue your answer.
What combination of T and M will you choose? Suppose that the price of day trip rises to $80. How will this change your decision making?
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