The ABC company manufactures AM/FM clock radios and sells on average 3,000 units monthly at Rs.25 each to retail stores. Its closest competitor produces a similar type of radio that sells for Rs.28.

The ABC company manufactures AM/FM clock radios and sells on average 3,000 units monthly at Rs.25 each to retail stores. Its closest competitor produces a similar type of radio that sells for Rs.28.

a) If the demand for ABC product has an elasticity coefficient of -3, how many will it sell per month if the price is lowered to Rs.22?
b) The competitor decreases the price to Rs.24. If cross-elasticity between the two radios is 0.3 what will the ABC’s monthly sales be??
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