ScholarMatic: Explanation & Answer
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You sell hotdogs outside the library. Originally you sell your hotdog for $6 each and you sell 60 hotdogs per day. You trial selling your hotdogs for $4 each and notice you sell 100 hotdogs.
a.Using the mid-point formula to calculate the % change in the price of hotdogs.
b.Using the mid-point formula to calculate the % change in the quantity of hotdogs sold.
c.Using a and b to determine the price elasticity of demand for selling hotdogs outside the library. Is demand inelastic or elastic?
d.Explain using the elasticity you have calculated in c, whether you should you set your price at $6 or $4 in order to maximise total revenue?
e.Should you continue to raise your price above %$6 or lower it further below $4 in order to maximise total revenue? When should you stop raising or lowering price to maximise total revenue?
ScholarMatic: Explanation & Answer
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