2. Economics
3. please work this on an excel spreadsheet thanks hanna corporation...

# Question: please work this on an excel spreadsheet thanks hanna corporation...

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Please work this on an excel spreadsheet Thanks!

Hanna Corporation markets a compact microwave oven. In 2010 they sold 23,000 units at $375 each. Per capita disposable income in 2010 was$6,750. Hanna economists have determined that the arc price elasticity for this microwave oven is −1.2. Use arc price elasticity   to answer questions below:

1.        In 2011 Hanna is planning to lower the price of the microwave oven to $325. Will a price decrease in 2011 help company revenue growth? Why? (Hints: How would you interpret price elasticity −1.2? Will total revenue in 2011 be higher than 2010? ) 2. In 2011 Hanna is planning to lower the price of the microwave oven to$325. What sales volume for 2011 will be assuming that all other things remain equal?
3.        However, in checking with government economists, Hanna finds that per capita disposable income is expected to rise to $7,000 in 2011. In the past the company has observed an arc income elasticity of +2.5 for microwave ovens. Given that the price is reduces to$325 and that per capita disposable income   increases to \$7,000, what sales volume for 2011 will be? Assume that the price and income effects are independent and additive. (Hints: Read " The Combined Effect of Demand Elasticities " in the textbook )