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Exotic Handbags Limited a top-of-the-range ladies handbag manufacturer sells their product for R2 000 per...

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Finance

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Exotic Handbags Limited a top-of-the-range ladies handbag manufacturer sells their product for R2 000 per handbag. The annual demand at this price is 100 000 handbags per annum. Market research indicates that a price increase to R2 500 per handbag with no other associated cost increase will result in demand decreasing by 30 000 handbags per annum. a) Calculate Exotic Handbags average product price elasticity of (4) demand. b) Would you recommend a price increase? Justify your answer. (4)

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