When XYZ firm entered the market for good A two years back, it kept the price of its product low to attract customers away from its leading competitor. The firm has now established itself and has a market share of 20 percent. The management of XYZ is planning to increase price of A from the current $6 per unit to $7 per unit. Timothy Walters, the marketing head, however, feels this is not a good idea because it will reduce quantity demanded drastically from the current 1,200 units to 900 units. His colleague and the head of the sales department, Jake Mayers, feels that the quantity demanded would only decline by 250 units. According to Jake, the firm can afford to increase the price because even after the price increase they would still have significant market share

B) The demand for good A is elastic.

Explanation:

Both Timothy and Jake believe that the demand is elastic, Timothy believes the PED = 1.75, while Jake believes the PED = 1.46. The difference is that Timothy believes the demand is more elastic.

Option A is not correct because Timothy believes total revenue will fall while Jake believes it will increase.

Option C is not correct because both believe that their market share will decrease.  

Option D is not correct because both Timothy and Jake are arguing about higher prices, not lower prices.

Option E is not correct because an increase inn the price of a good does not shift the demand curve, it moves the equilibrium point within the given demand and supply curves.

answer; encouraging the development of innovations by firms attempting to break a monopoly; (creative destruction)

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explanation:

f