Question

In this question, assume that all variables other than price and quantity are held constant. At Betty's Burgers, the hamburgers have a price elasticity of demand 505 and Betty has increased sales by 85.00%. Betty must have decreased the price of her burgers. Betty must have changed her price by 57.13 Due to the price change, Betty's total revenue will increase. Patty's Putts increased the price of a round of miniature golf by 46.0%. Patty has calculated her price elasticity of 0.12 demand at CPU温度

Answer 1

Price elasticity = % Change in quantity demanded (sales) / % Change in price

(1) For Betty,

(a) Betty has decreased price (following law of demand).

(b) Betty has decreased price by 16.83%.

5.05 = 85% / % Change in price

% Change in price = 85% / 5.05 = 16.83%

(c) Total revenue will increase.

Since elasticity > 1, demand is elastic and a decrease in price will increase total revenue.

(2) For Patty,

(a) She can expect number of golfers to decrease (following law of demand).

(b) She can expect number of golfers to change by 5.52%.

0.12 = % Change in quantity / 46%

% Change in quantity = 0.12 x 46% = 5.52%

(c) She can expect total revenue to increase.

Since elasticity < 1, demand is inelastic and an increase in price will increase total revenue.