ECONOMICS A small grocery store faces the following demand for lobster. PRICE &
ID: 1094709 • Letter: E
Question
ECONOMICS
A small grocery store faces the following demand for lobster. PRICE & QUANTITY: $0 and 80 quantity. $6 and 60 quanity. $12 and 40 quantity. $18 and 20 quantity. $24 and 10 quantity. The grocer is currently charging $18 per pound and is thinking of lowering the prices of lobster to $12 per pound. Using the demand information given , find the price elasticity od demand for lobster. Is demand inelastic, elastic or unit elastic? based on your elasticity findings and without doing any furthur computations, determine weather or not a price decrease from 18 to 12 will increase revenue from the grocer. Briefly explain your answer.
Explanation / Answer
Price is elastic as shown above but elasticity reduces when price increases from 18 to 24. As shown in the table , the revenue will increase if the price is reduced from 18 to 12.
Price Qty Change P Change Q Ratio Revenue 0 80 6 20 3.33 0 6 60 6 20 3.33 360 12 40 6 20 3.33 480 18 20 6 20 3.33 360 24 10 6 10 1.67 240Related Questions
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