Answered: . The seafood restaurant you manage has…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Related questions

Question

100%

24. The seafood restaurant you manage has daily specials. You have observed that the fresh salmon is overstocked and you want to increase salmon sales by 30%. You know the price elasticity of demand for salmon is -1.2. How much (and in what direction) should you change salmon prices to increase sales by 30%? Will this increase or decrease total salmon revenue? How do you know? You also know that fresh salmon and fresh tuna have a cross price elasticity of +.5. With the percentage decrease in salmon prices calculated above, how much more/less fresh tuna will you sell? Are salmon and tuna complements or substitutes at your restaurant?

Expert Solution

Step 1

Given

The price elasticity of demand for salmon is -1.2

The required increase in the sale of salmon =30%

We know that the price elasticity of demand is calculated as

$e = \frac{% c h a n g e i n s a l e s}{% c h a n g e i n p r i c e}$

Cross price elasticity for fresh salmon and fresh tuna is 5

Cross price elasticity is calculated as

$η = \frac{% c h a n g e i n s a l e o f t u n a}{% c h a n g e i n p r i c e o f s a l m o n}$

Step by step

Solved in 5 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions