Scenario 1
According to the information that the cupcake company provided for the analysis, the price point at which the company should sales one dozen of cupcakes is $6.00. At $6.00 price per dozen the cupcake company quantity demanded would be 100 dozen cupcakes per day. This would amount to profits of $200 per day. When the company fixed cost of $100 is introduced into the analysis, the $6.00 price would still be the best price point per dozen with profits of $100.00.
The price of elasticity of demand at the optimal price quantity of 100 dozen cupcakes at a price of $6.00 would be -2.539 when compared to the price point of $5.00. This shows that the price of cupcakes is elastic and is sensitive to the price changes. When the data from the …show more content…
If the restaurant were to lower the cost of beer by $0.50 to the $4.00 price point, the initial percent change in price would be 11.11% and would have a quantity demanded of 268pints. When the mid-point formula is used to determine the percent change in the price of the same data, the percent change in price was 11.76%. This would make the price of beer $3.97 and the quantity demanded of 267 pints of beer a night.
With an -11.11% price change to $4.00, the restaurant would have a 7.2% increase in the sales of beer. The quantity demanded by customers would increase by 18 pints and would rise to 268pints a night. From the information provided by the company, the sale of beer, appetizers, and entrees all complement each other. But beer and wine are substitutes of each other. Therefore, if the company decides to reduce the price of beer to $4.00, there will be an increase in the sales of appetizers and entrees and a decrease in the sale of wine. According to the calculations when the price of beer is reduced to $4.00, wine sales would decrease from a quantity demanded of 40 to 37 glasses; appetizers sales would increase from quantity demanded of 70 to 79; and entrees would increase from quantity demanded of 25 to
According to the information that the cupcake company provided for the analysis, the price point at which the company should sales one dozen of cupcakes is $6.00. At $6.00 price per dozen the cupcake company quantity demanded would be 100 dozen cupcakes per day. This would amount to profits of $200 per day. When the company fixed cost of $100 is introduced into the analysis, the $6.00 price would still be the best price point per dozen with profits of $100.00.
The price of elasticity of demand at the optimal price quantity of 100 dozen cupcakes at a price of $6.00 would be -2.539 when compared to the price point of $5.00. This shows that the price of cupcakes is elastic and is sensitive to the price changes. When the data from the …show more content…
If the restaurant were to lower the cost of beer by $0.50 to the $4.00 price point, the initial percent change in price would be 11.11% and would have a quantity demanded of 268pints. When the mid-point formula is used to determine the percent change in the price of the same data, the percent change in price was 11.76%. This would make the price of beer $3.97 and the quantity demanded of 267 pints of beer a night.
With an -11.11% price change to $4.00, the restaurant would have a 7.2% increase in the sales of beer. The quantity demanded by customers would increase by 18 pints and would rise to 268pints a night. From the information provided by the company, the sale of beer, appetizers, and entrees all complement each other. But beer and wine are substitutes of each other. Therefore, if the company decides to reduce the price of beer to $4.00, there will be an increase in the sales of appetizers and entrees and a decrease in the sale of wine. According to the calculations when the price of beer is reduced to $4.00, wine sales would decrease from a quantity demanded of 40 to 37 glasses; appetizers sales would increase from quantity demanded of 70 to 79; and entrees would increase from quantity demanded of 25 to