You are advising a coffee shop manager who wants to estimate how much sales will change if the price of a latte rises. You tell him that he should measure the change in sales using the percentage change in quantity of coffee sold rather than the number of cups of coffee or the total ounces of coffee sold. Similarly, you tell him that he should measure the price increase in percentage terms rather than in terms of absolute dollars. Explain why he should measure elasticity in percentage terms rather than in terms of dollars and cups.

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Answer 1

Textbook Question

Chapter 4, Problem 1RQ

You are advising a coffee shop manager who wants to estimate how much sales will change if the price of a latte rises. You tell him that he should measure the change in sales using the percentage change in quantity of coffee sold rather than the number of cups of coffee or the total ounces of coffee sold. Similarly, you tell him that he should measure the price increase in percentage terms rather than in terms of absolute dollars. Explain why he should measure elasticity in percentage terms rather than in terms of dollars and cups.

Expert Solution & Answer

To determine

To advise the coffee shop manager the reason for using percentage method to calculate the elasticity.

Explanation of Solution

The elasticity of demand indicates the change in quantity demanded due to a change in price. However, the elasticity is unitless that means only magnitude of change is considered for example elasticity could be 1, 1.5, 1.7, etc. Here, elasticity is just a magnitude (numeric value). Thus, while calculating the elasticity, the absolute values like, dollars, units (number of teacup) does not matter. So, using the percentage method avoids the problem of different units of calculation and the problem of direction to change. Thus, it is advised to the manager to estimate the change in percentage term.

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Students have asked these similar questions

At the 8:10 café, there are equal numbers of two types of customers with the following values. The café owner cannot distinguish between the two types of students because many students without early classes arrive early anyway (that is she cannot price discriminate). Students with early classes Students without early classes Coffee 70 60 Banana 50 100 The MC of coffee is 10. The MC of a banana is 40. Is bundling more profitable than selling separately? HINT: if you sell the bundle, can you make more by offering coffee separately? If so, what price should be charged for the bundle? (Show calculations)

Your marketing department has identified the following customer demographics in the following table. Construct a demand curve and determine the profit maximizing price as well as the expected profit if MC=$1. The number of customers in the target population is 10,000. Use the following demand data: Group Value Frequency Baby boomers $5 20% Generation X $4 10% Generation Y $3 10% `Tweeners $2 10% Seniors $2 10% Others $0 40%

Your marketing department has identified the following customer demographics in the following table. Construct a demand curve and determine the profit maximizing price as well as the expected profit if MC=$1. The number of customers in the target population is 10,000. Group Value Frequency Baby boomers $5 20% Generation X $4 10% Generation Y $3 10% `Tweeners $2 10% Seniors $2 10% Others $0 40% ur marketing department has identified the following customer demographics in the following table. Construct a demand curve and determine the profit maximizing price as well as the expected profit if MC=$1. The number of customers in the target population is 10,000.

Answer 2

Textbook Question

Chapter 4, Problem 1RQ

You are advising a coffee shop manager who wants to estimate how much sales will change if the price of a latte rises. You tell him that he should measure the change in sales using the percentage change in quantity of coffee sold rather than the number of cups of coffee or the total ounces of coffee sold. Similarly, you tell him that he should measure the price increase in percentage terms rather than in terms of absolute dollars. Explain why he should measure elasticity in percentage terms rather than in terms of dollars and cups.

Expert Solution & Answer

To determine

To advise the coffee shop manager the reason for using percentage method to calculate the elasticity.

Explanation of Solution

The elasticity of demand indicates the change in quantity demanded due to a change in price. However, the elasticity is unitless that means only magnitude of change is considered for example elasticity could be 1, 1.5, 1.7, etc. Here, elasticity is just a magnitude (numeric value). Thus, while calculating the elasticity, the absolute values like, dollars, units (number of teacup) does not matter. So, using the percentage method avoids the problem of different units of calculation and the problem of direction to change. Thus, it is advised to the manager to estimate the change in percentage term.

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Answer 3

Textbook Question

Chapter 4, Problem 1RQ

You are advising a coffee shop manager who wants to estimate how much sales will change if the price of a latte rises. You tell him that he should measure the change in sales using the percentage change in quantity of coffee sold rather than the number of cups of coffee or the total ounces of coffee sold. Similarly, you tell him that he should measure the price increase in percentage terms rather than in terms of absolute dollars. Explain why he should measure elasticity in percentage terms rather than in terms of dollars and cups.

Expert Solution & Answer

To determine

To advise the coffee shop manager the reason for using percentage method to calculate the elasticity.

Explanation of Solution

The elasticity of demand indicates the change in quantity demanded due to a change in price. However, the elasticity is unitless that means only magnitude of change is considered for example elasticity could be 1, 1.5, 1.7, etc. Here, elasticity is just a magnitude (numeric value). Thus, while calculating the elasticity, the absolute values like, dollars, units (number of teacup) does not matter. So, using the percentage method avoids the problem of different units of calculation and the problem of direction to change. Thus, it is advised to the manager to estimate the change in percentage term.

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Answer 4

Textbook Question

Chapter 4, Problem 1RQ

You are advising a coffee shop manager who wants to estimate how much sales will change if the price of a latte rises. You tell him that he should measure the change in sales using the percentage change in quantity of coffee sold rather than the number of cups of coffee or the total ounces of coffee sold. Similarly, you tell him that he should measure the price increase in percentage terms rather than in terms of absolute dollars. Explain why he should measure elasticity in percentage terms rather than in terms of dollars and cups.

Expert Solution & Answer

To determine

To advise the coffee shop manager the reason for using percentage method to calculate the elasticity.

Explanation of Solution

The elasticity of demand indicates the change in quantity demanded due to a change in price. However, the elasticity is unitless that means only magnitude of change is considered for example elasticity could be 1, 1.5, 1.7, etc. Here, elasticity is just a magnitude (numeric value). Thus, while calculating the elasticity, the absolute values like, dollars, units (number of teacup) does not matter. So, using the percentage method avoids the problem of different units of calculation and the problem of direction to change. Thus, it is advised to the manager to estimate the change in percentage term.

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Answer 5

Textbook Question

Answer 6

Textbook Question

Answer 7

Expert Solution & Answer

To determine

To advise the coffee shop manager the reason for using percentage method to calculate the elasticity.

Explanation of Solution

The elasticity of demand indicates the change in quantity demanded due to a change in price. However, the elasticity is unitless that means only magnitude of change is considered for example elasticity could be 1, 1.5, 1.7, etc. Here, elasticity is just a magnitude (numeric value). Thus, while calculating the elasticity, the absolute values like, dollars, units (number of teacup) does not matter. So, using the percentage method avoids the problem of different units of calculation and the problem of direction to change. Thus, it is advised to the manager to estimate the change in percentage term.

Answer 8

Expert Solution & Answer

To determine

To advise the coffee shop manager the reason for using percentage method to calculate the elasticity.

Explanation of Solution

The elasticity of demand indicates the change in quantity demanded due to a change in price. However, the elasticity is unitless that means only magnitude of change is considered for example elasticity could be 1, 1.5, 1.7, etc. Here, elasticity is just a magnitude (numeric value). Thus, while calculating the elasticity, the absolute values like, dollars, units (number of teacup) does not matter. So, using the percentage method avoids the problem of different units of calculation and the problem of direction to change. Thus, it is advised to the manager to estimate the change in percentage term.

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

To determine

To advise the coffee shop manager the reason for using percentage method to calculate the elasticity.

Answer 12

Explanation of Solution

The elasticity of demand indicates the change in quantity demanded due to a change in price. However, the elasticity is unitless that means only magnitude of change is considered for example elasticity could be 1, 1.5, 1.7, etc. Here, elasticity is just a magnitude (numeric value). Thus, while calculating the elasticity, the absolute values like, dollars, units (number of teacup) does not matter. So, using the percentage method avoids the problem of different units of calculation and the problem of direction to change. Thus, it is advised to the manager to estimate the change in percentage term.

Answer 13

Ch. 4 - You are advising a coffee shop manager who wants...Ch. 4 - Prob. 2RQ Ch. 4 - You are working as a private math tutor to raise...Ch. 4 - You are working as a private math tutor to raise...Ch. 4 - You have been hired by the government of Kenya,...Ch. 4 - Prob. 6RQ Ch. 4 - Which will have a more price-elastic supply over...Ch. 4 - Certain skilled labor, such as hair cutting,...Ch. 4 - Although we could describe both the cross-price...Ch. 4 - Name two related goods you consume that would have...

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