Compute the elasticities for each independent variable. Note: Write down all of your calculations. P= 500, M= 5000, A= 10,000, I = 5,500, C=600
QD= - 5200 – 42(500) + 20(600) + 5.2(5500) + 0.20(10000) + 0.25(5000) = 17,650 Price Elasticity (Ep) = (P/Q) (∆Q/∆P) ∆Q/∆P = -42. Price Elasticity (Ep) = (P/Q) (-42) (500/17650) = -1.19
Ec = 20(600/17560) = 0.68
EA= (P/Q) (0.20) (10000/17650) = 0.11
EI = (P/Q) (5.2) (5500/17650) = 1.62
EM = (P/Q) (0.25) (5000/17650) = 0.07
Determine the implications for each of the computed elasticities for the business in terms of short-term and long-term pricing strategies. Provide a rationale in which you cite your results.
Price Elasticity is -1.19, a 1% increase in price reduces quantity by 1.19%. The demand for this product is elastic and higher revenue may discourage consumers.
Cross-price elasticity is 0.68, a 1% increase in the price of the competitor’s product will result in an increase in the quantity demand of the product by .68%. This shows inelastic conditions between the product and the price of the competitors therefore the competitors is not an issue because their price will not affect sales
Advertisement-elasticity is 0.11, a 1% increase in advertising expenditures increases the quantity of good sold by 11%. Therefore, demand is rather inelastic to advertising. Advertisement is not always a sure thing to increase revenue. It could have an adverse action and to lose customers

Income-elasticity is 1.62, with a 1% increase in income the demand will rise 1.62%. The firm can decide to increase price if cost of living increases.
In regard to the microwave oven the elasticity is 0.07, a 1% increase in the number of microwave ovens would increase the quantity of demand by 0.07%. Therefore, the demand is inelastic in this case
Recommend whether you believe that this firm should or should not cut its