The price elasticity of demand for one video game by EZ-Game is 2

Economics Jan 19, 2021

The price elasticity of demand for one video game by EZ-Game is 2.5 at the current price of $30 and with 100,000 online subscribers. Now suppose the company tries to lower the price to $27 (three dollars lower). Tip: the elasticity should be a negative number.

a. How many new subscribers would purchase the game?

b. How much their revenue of the game would change?

Expert Solution

The correct option is D) income-elastic product.

When the demand for a product is sensitive to the change in income of the consumer it means that the product has income elasticity of demand. Since the coefficient is greater than one it shows income-elastic product.

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