Question

13. For the first time in two years, Big G (the cereal division of General Mills) raised cereal prices by 4 percent. If, as a result of this price increase, the volume of all cereal sold by Big G dropped by 5 percent, what can you infer about the own price elasticity of demand for Big G cereal? Can you predict whether revenues on sales of its Lucky Charms brand increased or decreased? Explain. (LOI, LO3) 14. If Starbucks's marketing department estimates the income elasticity of demand for its coffee to be 2.6, how will the prospect of an economic boom (expected to increase consumers' incomes by 6 percent over the next year) impact the quantity of coffee Starbucks expects to sell? (LO1) 15. You are a division manager at Toyota. If your marketing department estimates that the semiannual demand for the Highlander is Q = 150,000-1.5P, what price should you charge in order to maximize revenues from sales of the Highlander? (LO1, LO2, L04, L05)