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hey whats up ? ? have a question  .


  Ironside
  Industries,
  Inc.,


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The Question

hey whats up ? ? have a question  .


  Ironside
  Industries,
  Inc.,
  is
  a
  leading
  manufacturer
  of
  tufted
  carpeting
  under
  the
  Ironside
  brand.
  Demand
  for
  Ironside?s
  products
  is
  closely
  tied
  to
  the
  overall
  pace
  of
  building
  and
  remodeling
  activity
  and,
  therefore,
  is
  highly
  sensitive
  to
  changes
  in
  national
  income.
  The
  carpet
  manufacturing
  industry
  is
  highly
  competitive,
  so
  Ironside?s
  demand
  is
  also
  very
  price
  sensitive.
  During
  the
  past
  year,
  Ironside
  sold
  15
  million
  square
  yards
  (units)
  of
  carpeting
  at
  an
  average
  wholesale
  price
  of
  $7.75
  per
  unit.
  This
  year,
  income
  per
  capita
  is
  expected
  to
  surge
  from
  $17,250
  to
  $18,750
  as
  the
  nation
  recovers
  from
  a
  steep
  recession.
  Without
  any
  price
  change,
  Ironside?s
  marketing
  director
  expects
  current
  year
  sales 
  to 
  rise 
  to 
  25 
  million 
  units. 
  

a) Calculate 
  the 
  implied 
  income 
  arc 
  elasticity 
  of 
  demand. 
  

b) Given
  the
  projected
  rise
  in
  income,
  the
  marketing
  director
  believes
  that
   the
  current
  volume
  of
  15
  million
  units
  could
  be
  maintained
  despite
  an
  increase
  in
  price
  of
  50¢
  per
  unit.
  On
  this
  basis,
  calculate
  the
  implied
  arc
  price
  elasticity
  of
  demand. 
  

c) Holding
  all
  else
  equal,
  would
  a
  further
  increase
  in
  price
  result
  in
  higher
  or
  lower
  total 
  revenue? 
  

 


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DATE ANSWERED

Sep 21, 2019

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