Question

Suppose you are the manager of a restaurant that serves an average of 400 meals per...

Suppose you are the manager of a restaurant that serves an average of 400 meals per day, at an average price per meal of $20. On the basis of a survey, you have determined that reducing the price of an average meal to $18 would increase the quantity demanded to $450 per day.

1. Compute the price elasticity of demand between these two points?

2. Would you expect total revenues to rise of fall? Explain?

3. Suppose you have reduced the average price of a meal to $18, and are considering a further reduction to $16. Another survey shows that the quantity demand of meals will increase from $450 to $500 per day. Compute the price elasticity of demand between these two points?

4. Would you expect total revenue to rise or fall as a result of this second price reduction? Explain.

5. Compute the total revenue at the three meal prices. Do these totals confirm your answers in (b) and (d)?

Please use clear and concise answers. Thank you!

Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
When consumers are willing to buy less than producers are willing to sell: A. there is...
When consumers are willing to buy less than producers are willing to sell: A. there is excess supply of the product in the market and the price will fall. B. there is excess demand for the product in the market and price will rise. C. there is excess supply of the product in the market and the price will rise. D. there is excess demand for the product in the market and price will fall. Assume that farmers can use...
Suppose that a monopolistically competitive restaurant is currently serving 270 meals per day (the output where...
Suppose that a monopolistically competitive restaurant is currently serving 270 meals per day (the output where MR = MC). At that output level, ATC per meal is $10 and consumers are willing to pay $12 per meal. Instructions: Enter your answers as whole numbers. a. What is the size of this firm’s profit or loss? b. Will there be entry or exit? Will this restaurant’s demand curve shift left or right? c. Suppose that the allocatively efficient output level in...
The Eastman Family Restaurant is open 24 hours per day. Fixed costs are $24,000 per month....
The Eastman Family Restaurant is open 24 hours per day. Fixed costs are $24,000 per month. Variable costs are estimatd at $9.60 per meal. The average revenue is $12 per meal. The restaurant wished to earn a profit before taxes of $6000 per month. Required: A) Compute the number of meals that must be served to earn a profit before taxes of $6,000 per month. B) Assume that fixed costs increase to $30,000 per month. How many additional meals must...
Using the Midpoint method compute the elasticity in the following cases and explain your answers.   ...
Using the Midpoint method compute the elasticity in the following cases and explain your answers.    Price Quantity Demanded (Income = AED60,000) Quantity Demanded (Income = AED90,000) 50 2000 1500 75 1500 1000 1. Calculate the income elasticity of demand when income rises from AED 60,000 to AED90,000 at a price of AED 75. (1 Mark) 2. Due to COVID 19, the average price of a Jones the Grocer meal fell from AED100 to AED 80. As a result, Slim’s...
A. If Glass Inc. produces 80 window panes per day at the market price of $60...
A. If Glass Inc. produces 80 window panes per day at the market price of $60 in a perfectly competitive market, what would happen to price if Glass Inc. increases production to 120 window panes, all else equal? The price would decrease as production by Glass Inc. rises. The price would fluctuate in an unknown pattern. The price would remain the same. The price would increase as production by Glass Inc. rises. 1. If the total variable cost of producing...
You are presently selling 1000 cups of coffee per day at $1.00 per cup. You want...
You are presently selling 1000 cups of coffee per day at $1.00 per cup. You want to increase sales by dropping the price to $0.80 per cup. The Price Elasticity of Demand is -2.2. What is your expected new level of sales? Compare Total Revenue before and after the change in price. How would you characterize this product?
6) The price elasticity of demand for new cars is 1.2. If automobile manufacturers raise their...
6) The price elasticity of demand for new cars is 1.2. If automobile manufacturers raise their price, then __________. A) total revenue will fall. B) total revenue will remain unchanged. C) total revenue will increase. D) total revenue will fall initially but eventually rise. 7) Read the article entitled “Alcohol Policy and Sexually Transmitted Diseases”. You can find the article on Moodle or Canvas. The article was a direct application of the following elasticity concept: A) Price Elasticity of Demand...
1.If price rises by 20% and quantity demanded of rice falls by 100 pounds, the elasticity...
1.If price rises by 20% and quantity demanded of rice falls by 100 pounds, the elasticity of demand is : (1 point) a. greater than 1 b. equal to -5 c. equal to -20 d. cannot be determined without additional information. 2.If quantity supplied responds only slightly to a change in price, then: (1 point) a. Supply is elastic b. An increase in price will shift the supply curve to a large extent c. Supply is inelastic d. Supply is...
1.) Suppose if the price of a good is $12, the quantity demanded is 50 units;...
1.) Suppose if the price of a good is $12, the quantity demanded is 50 units; when the price is $10, the quantity demanded is 100 units. Use the midpoint approach to compute the price elasticity of demand. Is demand at this point relatively responsive or relatively unresponsive to price changes? 2.) For this exercise you will need to first build a graph to these specifications: Draw a downward sloping demand curve with vertical intercept (0,4) and horizontal intercept (8,0)....
Suppose you are the manager of a firm that produces three goods: R, S and T....
Suppose you are the manager of a firm that produces three goods: R, S and T. The price Elasticity of demand for R is 1.2, for S it is 1.00 and for T it is 0.75. The firm experience serious cash flow problems and you have to increase total revenue as soon as possible. if you were in a position to set the price for the goods. what would be your pricing strategy for each product? provide reasons for your...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT