Level-Mow, Inc. manufactures an highly reliable riding lawnmower. Level-Mow currently sells 1200 units per year at a current price of $2,250. Level-Mow's research department has suggested reducing the price of its mower to $2,150 and estimates that at this price and volume, its price elasticity of demand is -4.00
a. If the research department is correct, what will be the annual quantity sold of the mowers after the price reduction?
b. What will be Level-Mow's new total revenue from mower sales?
In response to this price reduction, Level-Mow's main competitor, Super-Cut, Inc. then lowers the selling price of its comparable model from $2,000 to $1,600. If the arc cross price elasticity of demand between the two mowers is .818 over the range of the proposed price cuts:
c. Calculate the change in quantity of lawnmowers sold by Level-Mow, following Super-Cut's price reduction.?
d.should be asking what new price it would take to get Level-Mow back to the level of output you solved for in part a. So they started at 1200, they cut price and raised Q, their competitor cut price and drove their Q back to 1200, and now they want to get it back up again.