It is going well with Danielle's business. She contacts the team again, this time asking for information around pricing decisions. She is considering increasing the price of her pillowcases. Your team is able to calculate the various elasticities of Danielle's business. Danielle's own price elasticity of demand -2.27 Danielle's own price elasticity of supply 1.54 Income elasticity of demand 2.55 Cross-price elasticity: IKEA's pillowcases 1.56 Cross-price elasticity: IKEA's sofas -1.80 "IKEA offers a wide range of well-designed, functional home furnishing products. It has 67 shops in the USA as well as a large online presence in the USA. Your task is the following content in Danielle's report: One, an explanation of her price elasticity of demand and supply, what implications these have for her business and why it is important for her to understand both. Two, given Danielle's price elasticity of demand, what decision she should take around price increases (which you carefully explain to her). Three, explain to Danielle what her income and cross-price elasticities of demand mean and why she should be concerned about these.
