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 2.55 and Betty has increased sales by 85.00%.

Answer 1

Betty must have changed her price by 33.33%

Since the price elasticity of demand coefficient is 2.55, this means that if the price is changed by one per cent then quantity demanded will change by 2.55%.

Thus, when quantity is changed by 2.55% then the price is by per cent = 1

when quantity is changed by 1% then the price is by per cent = 1/2.55

when quantity is changed by 85% then the price is by per cent = 1/2.55 x 85

Petty can expect the number of golfers to change by 27.72%

Since the price elasticity of demand coefficient is 0.42, this means that if the price is changed by one per cent then quantity demanded will change by 0.42%.

Thus, when the price is changed by 1% then the quantity is by per cent = 0.42

when the price is changed by 66% then the quantity is by per cent = 0.42X66 = 27.72%