Problem: Suppose that the demand for Dell laptop computers can be characterized by the following point elasticities: (own) price elasticity = -1.9, cross-price elasticity with computer printers = -2, and income elasticity = +1.1. Based on these numbers answer the following questions. Explain your answers and show your work.
1. If the goal of Dell was to increase total sales revenue (ignoring cost considerations), would it raise or lower its selling price? Why?
2. What would happen to the demand for Dell laptop computers if the price of computer printers fell by 3%? Are the two goods substitutes or complements? Explain your answer.
3. What would happen to the demand for Dell laptop computers if consumer income rose by 4%? Be specific. Are laptop computers a normal or an inferior good? Explain.