(a)[8]
Using price elasticity of demand, explain why raising the product’s price is:
- a poor choice for a firm selling a product that takes up a large share of household income. [4]
- a sensible choice for a firm selling a product that takes up only a small share of household income. [4]
(b)[12]
Discuss whether cross elasticity of demand or income elasticity of demand is more likely to help a firm with its pricing decisions.