If the price of ice cream increases from $8 to $10 a gallon, quantity demanded of frozen yogurt increases from 120 to138 gallons, ceteris paribus. As a result, the percentage change in the quantity demanded of frozen yogurt isO 0.1395 %-0.1395-13.95%O 13.95 %

Elasticity measure the percentage change in the quantity demanded of a product with a percentage…

Answered: If the price of ice cream increases…

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter6: Elasticities

Section: Chapter Questions

Problem 5P

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These questions require application of economic theory relating to elasticity of demand andsupply. All calculations must be shown in full. Answer ALL the questions.Q.3.1 A store that sells maize meal discovers that when the price of 1kg maize meal IsR24 per kilogram, the quantity demanded is 306 kgs per week. When the pricedecreases to R21 per kg, then the sales increase to 340 kgs per week. Use thisinformation to answer questions Q.3.1.1 and Q.3.1.2 below.Q.3.1.1 Determine the price elasticity of maize meal using the Arc method. (5)Q.3.1.2 Discuss the relationship between the price elasticity of maize mealand the total revenue the store received from the sales. Advise thestore on an appropriate pricing strategy.(7)Q.3.2 The store selling maize meal makes a further discovery, when the price of ricechanges from R30 per kg to R26 per kg, then the quantity of rice demandeddecreases from 1360 kg per month to 1238 kg per month. Use this informationto answer Q.3.2.1 and Q.3.2.2 below.Q.3.2.1…
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If the price of ice cream increases from $8 to $10 a gallon, quantity demanded of frozen yogurt increases from 120 to 138 gallons, ceteris paribus. As a result, the percentage change in the quantity demanded of frozen yogurt is O 0.1395 % -0.1395 -13.95% 13.95 %