Question 1 [Mcdonald's, a big burger joint, is charging $6 for its very famous Beef Mac hamburger and selling 20 million Beef Mac in a year in United States.] a. [Suppose Mcdonald's increases the price of its Beef Mac to $6.50. Consequently, quantity sold of the Beef Mac falls to 17 million. How much revenue will Mcdonald's gain? What can you infer about the price elasticity of demand (PED) for Mcdonald's Beef Mac? Assume in an alternative scenario, the increase in the price of Beef Mac to $ 6.5 reduces its quantity sold to 19 million. How much revenue will Mcdonald's gain now? What can you conclude about the PED now? b. [Given the two scenarios presented in part a, which one do you think is more likely and why? Present evidence in 100 words or less to support your prediction. c. [Suppose Mcdonals's Beef Mac and movie tickets have negative cross price elasticity of -0.8. What does this number tell us about the relationship between the Beef Mac and movie tickets? Suppose that AMC entrainment, United States' leading cinema exhibitor, decides to increase the price of its movie tickets by 10%. How will this development affect McDonald's pricing decisions as indicated in part (a)? Discuss both the scenarios (as presented in part (a)) in 200 or less words.
Question 1 [Mcdonald's, a big burger joint, is charging $6 for its very famous Beef Mac hamburger and selling 20 million Beef Mac in a year in United States.] a. [Suppose Mcdonald's increases the price of its Beef Mac to $6.50. Consequently, quantity sold of the Beef Mac falls to 17 million. How much revenue will Mcdonald's gain? What can you infer about the price elasticity of demand (PED) for Mcdonald's Beef Mac? Assume in an alternative scenario, the increase in the price of Beef Mac to $ 6.5 reduces its quantity sold to 19 million. How much revenue will Mcdonald's gain now? What can you conclude about the PED now? b. [Given the two scenarios presented in part a, which one do you think is more likely and why? Present evidence in 100 words or less to support your prediction. c. [Suppose Mcdonals's Beef Mac and movie tickets have negative cross price elasticity of -0.8. What does this number tell us about the relationship between the Beef Mac and movie tickets? Suppose that AMC entrainment, United States' leading cinema exhibitor, decides to increase the price of its movie tickets by 10%. How will this development affect McDonald's pricing decisions as indicated in part (a)? Discuss both the scenarios (as presented in part (a)) in 200 or less words.
Chapter5: Elasticity Of Demand And Supply
Section: Chapter Questions
Problem 3.6P: (Price Elasticity of Supply) Calculate the price elasticity of supply for each of the following...
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![Question 1
[Mcdonald's, a big burger joint, is charging $6 for its very famous Beef Mac
hamburger and selling 20 million Beef Mac in a year in United States.]
a. [Suppose Mcdonald's increases the price of its Beef Mac to $6.50. Consequently,
quantity sold of the Beef Mac falls to 17 million. How much revenue will
Mcdonald's gain? What can you infer about the price elasticity of demand (PED)
for Mcdonald's Beef Mac? Assume in an alternative scenario, the increase in the
price of Beef Mac to $ 6.5 reduces its quantity sold to 19 million. How much
revenue will Mcdonald's gain now? What can you conclude about the PED now?
b. [Given the two scenarios presented in part a, which one do you think is more
likely and why? Present evidence in 100 words or less to support your prediction.
c. [Suppose Mcdonals's Beef Mac and movie tickets have negative cross price
elasticity of -0.8. What does this number tell us about the relationship between
the Beef Mac and movie tickets? Suppose that AMC entrainment, United States'
leading cinema exhibitor, decides to increase the price of its movie tickets by
10%. How will this development affect McDonald's pricing decisions as indicated
in part (a)? Discuss both the scenarios (as presented in part (a)) in 200 or less
words.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F1142add5-91c5-4a27-aa8c-f5851236ec6a%2F2e5514ec-784a-4cea-9cc9-f1ac6e9e188f%2Fi9yp0mm_processed.png&w=3840&q=75)
Transcribed Image Text:Question 1
[Mcdonald's, a big burger joint, is charging $6 for its very famous Beef Mac
hamburger and selling 20 million Beef Mac in a year in United States.]
a. [Suppose Mcdonald's increases the price of its Beef Mac to $6.50. Consequently,
quantity sold of the Beef Mac falls to 17 million. How much revenue will
Mcdonald's gain? What can you infer about the price elasticity of demand (PED)
for Mcdonald's Beef Mac? Assume in an alternative scenario, the increase in the
price of Beef Mac to $ 6.5 reduces its quantity sold to 19 million. How much
revenue will Mcdonald's gain now? What can you conclude about the PED now?
b. [Given the two scenarios presented in part a, which one do you think is more
likely and why? Present evidence in 100 words or less to support your prediction.
c. [Suppose Mcdonals's Beef Mac and movie tickets have negative cross price
elasticity of -0.8. What does this number tell us about the relationship between
the Beef Mac and movie tickets? Suppose that AMC entrainment, United States'
leading cinema exhibitor, decides to increase the price of its movie tickets by
10%. How will this development affect McDonald's pricing decisions as indicated
in part (a)? Discuss both the scenarios (as presented in part (a)) in 200 or less
words.
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