During a particular week six months ago, suppose that the price of a 1 pound slab of Scottish Coho salmon at your local grocery store was $20; currently the price is $25/lb. The manager informs you that 100 pounds were sold during a particular week six months ago when the price was $20/lb. while 80 pounds were sold this week. Calculate the price elasticity of demand (point formula, not midpoint/arc formula—consult the textbook). Based solely on your calculation, is the demand relatively elastic or relatively inelastic? If the grocery store is a price setter, should it increase or decrease the price of salmon to increase its revenue? Only consider this one good—keep it simple. Answer in a few sentences.
During a particular week six months ago, suppose that the price of a 1 pound slab of Scottish Coho salmon at your local grocery store was $20; currently the price is $25/lb. The manager informs you that 100 pounds were sold during a particular week six months ago when the price was $20/lb. while 80 pounds were sold this week. Calculate the price elasticity of demand (point formula, not midpoint/arc formula—consult the textbook). Based solely on your calculation, is the demand relatively elastic or relatively inelastic? If the grocery store is a price setter, should it increase or decrease the price of salmon to increase its revenue? Only consider this one good—keep it simple. Answer in a few sentences.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
- During a particular week six months ago, suppose that the price of a 1 pound slab of Scottish Coho salmon at your local grocery store was $20; currently the price is $25/lb. The manager informs you that 100 pounds were sold during a particular week six months ago when the price was $20/lb. while 80 pounds were sold this week.
-
- Calculate the
price elasticity of demand (point formula, not midpoint/arc formula—consult the textbook). Based solely on your calculation, is the demand relatively elastic or relatively inelastic?
- Calculate the
-
- If the grocery store is a price setter, should it increase or decrease the price of salmon to increase its revenue? Only consider this one good—keep it simple. Answer in a few sentences.
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