Explain how would you classify the product

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Income elastic

Market Researchers at the Lawrence Company estimate that the demand function for a product is

Q = 75 P-2 I-2

Q is quantity demanded, P is Price, and I is Income.

Marginal cost is estimated to be $15.

a. They have their product priced at $30. Is this optimal? Why or why not.

b. What would you recommend their optimal price to be?

c. How would you classify the product in terms of it's income elasticity?

 

Reference no: EM1328287

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