2.Suppose you are the manager of a local restaurant. Prior to COVID-19 you served an average of 300 meals a day at a price of $15.You are trying to stay open even though restaurants are limited to 50% capacity. To offset the reduced seating capacity you raised your price to $18 and are now serving 160 meals a day with both dine in and take out.Compute the Total Revenue for your restaurant at the $15 price and the total revenue at the new $18 price. Did your total revenue rise or fall? Use the mid-point formula to calculate the price elasticity of demand between these two price points. Does this represent Elastic or Inelastic demand?Finding it difficult the keep the restaurant open at 50% you consult with a local Economist who suggests that you should try reducing your prices to bring in more customers. You drop your price down to $16 and find that sales increased to 200 customers a day.Compute the Total Revenue for the restaurant at the new $16 price. How does this compare to your previous total revenue at $18? Compute the price elasticity of demand between these two price points. Does this represent Elastic or Inelastic demand? Considering the data on price elasticity and total revenue what is the best pricing strategy for your restaurant?

Answered: 2. Suppose you are the manager of a…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Suppose you are the manager of a local restaurant. Prior to COVID-19 you served an average of 300 meals a day at a price of $15.

You are trying to stay open even though restaurants are limited to 50% capacity. To offset the reduced seating capacity you raised your price to $18 and are now serving 160 meals a day with both dine in and take out.

Compute the Total Revenue for your restaurant at the $15 price and the total revenue at the new $18 price. Did your total revenue rise or fall?

Use the mid-point formula to calculate the price elasticity of demand between these two price points. Does this represent Elastic or Inelastic demand?

Finding it difficult the keep the restaurant open at 50% you consult with a local Economist who suggests that you should try reducing your prices to bring in more customers. You drop your price down to $16 and find that sales increased to 200 customers a day.