Plum charges £500 for its smartphone, producing a revenue of £8 million per month. Itfears that a competitor, MV, will s

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Plum charges £500 for its smartphone, producing a revenue of £8million per month. Itfears that a competitor, MV, will shortly makea price reduction of 10% for its product. Themarketing manager isconsidering whether to match this price reduction in order to tryandmaintain sales. She has estimated that Plum’s PED is –1.5 andthe CED with thecompetitor’s product is 0.8. The marginal cost isestimated to be 42% of the price.a) Calculate the effect on Plum’ssales volume and revenue assuming it maintains its price attheexisting level.b) Calculate how much of a price cut Plum would needto make to maintain its sales volumeat the existing level.c)Evaluate whether the price cut is a good strategy.