Danny “Dimes" Donahue is a neighborhood's 9-year-old entrepreneur. His most recent venture is selling homemade brownies that he bakes himself. At a price of $1.75 each, he sells 250. At a price of $1.25 each, he sells 300. Instructions: Use the midpoint method and round your answer to two decimal places. Do not include a negative sign (-). a. What is the elasticity of demand? b. Is demand elastic or inelastic over this price range? O Inelastic O Elastic c. If demand had the same elasticity for a price decline from $1.25 to $0.75 as it does for the decline from $1.75 to $1.25, would cutting the price from $1.25 to $0.75 increase or decrease Danny's total revenue? Decrease O Increase
Danny “Dimes" Donahue is a neighborhood's 9-year-old entrepreneur. His most recent venture is selling homemade brownies that he bakes himself. At a price of $1.75 each, he sells 250. At a price of $1.25 each, he sells 300. Instructions: Use the midpoint method and round your answer to two decimal places. Do not include a negative sign (-). a. What is the elasticity of demand? b. Is demand elastic or inelastic over this price range? O Inelastic O Elastic c. If demand had the same elasticity for a price decline from $1.25 to $0.75 as it does for the decline from $1.75 to $1.25, would cutting the price from $1.25 to $0.75 increase or decrease Danny's total revenue? Decrease O Increase
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Chapter3: Demand Analysis
Section: Chapter Questions
Problem 7E: In an attempt to increase revenues and profits, a firm is considering a 4 percent increase in price...
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