Relationship between mr and elasticity, Managerial Economics

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Suppose that the price elasticity of demand for cereal is -0.75 and the cross-price elasticity of demand between cereal and the price of milk is -0.9. If the price of milk rises by 10%, what would have to happen to the price of cereal to exactly offset the rise in the price of milk so as to leave the quantity of cereal demanded unchanged?

Suppose you have estimated the following demand function for the product you sell:

Q = 5 - 0.2P

At what price will the demand for your product be unitary elastic? (Hint: Begin by recalling the relationship between MR and elasticity.


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