Question

Question 2 (30 points) 2.1) (10 points) Suppose you are a marketing manager in Tim Hortons Inc (THI). The medium- size iced cappuccino (Iced Capp) is the most popular drink in THI during summer and so THI wants you to suggest the best strategy to increase total revenue from selling Iced Capp. From the marketing report, it shows that customers can be divided into two separate groups according to their likely responses to any price discount. The following table shows how the two groups respond to a 15% discount. Group A Group B (sales per period) (sales per period) Volume of sales in units of hundreds (Q1) (before the 15% discount) 52 55 Volume of sales in units of hundreds (Q2) 62 61 (after the 15% discount) 2. 1a) (6 points) Calculate the own-price elasticity of demand for Group A and Group B. • The own-price elasticity for Group A: na- The own-price elasticity for Group B: nB = .

--Since the demand function is not given, you need to use the midpoint of Q. (For question 2.1a).)

--Depending on Price Elasticity. (For question 2.1b).)

Answer 1

2.1c I > A) Group A only This is because NA meaning the demand is elastic. when price deceases, the demanded will increase more than the price decrease. quantity by