a) The price elasticity is basically the change in the quantity due to a 1% change in the price of the good. Price elasticity is usually negative since higher price means lower quantity demanded and thus sold. A price elasticity greater than 1 in absolute value means that a 1% increase in price reduces the quantity by more than 1%. Thus the consumers respond highly to price changes in the case when the price ealsticity in absolute value is greater than 1. If on the other hand, the price elasticity is less than 1 in absolute value then it means that 1% increase in price will reduce quantity demanded by less than 1% and thus the revenue earned will rise. Thus, it is better to operate on the inelastic part of the demand curve since if one is in the elastic part then it is better to reduce price becuase the quanitity rises more than proportionately to the fall in price and thus the revenue earned increases.

b) To compute the cross price elasticity or cross elasticity of demand between Future Flight's and Soaring Free's Frisbees, we need the change in quantity demanded of Future Flight Frisbees due to change in price of Soaring Free's Frisbees and the initial corresponding values.

Here, let quantity of the Future Flight Frisbees initially be=Q₀= 10,000 units

Price of Soring Bees' Frisbies initially be= P₀=$3.49

Let the new quantity of Future Flight Frisbees be Q₁=8000 units

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