Wendy 's And The Price Of Its Grilled Chicken Deluxe Sandwich

938 Words Feb 14th, 2016 4 Pages
1. Suppose Paula Flygare owns a 50-car parking lot and has two spaces unrented. You assure her that if she lowers the price 10 percent, she could rent out those two spaces. She replies: “You don’t understand price elasticity of demand, do you?” What’s her point?

Her point is that if she lowered her price 10 percent then she would be losing money because at the time she has 48 spaces rented out, if she were to drop the price to rent all spaces she would actually lose more money then just letting the two spaces stay empty.
4. Suppose Wendy’s cuts the price of its grilled chicken deluxe sandwich by 25 percent. What do you suppose would happen to the demand for (a) Wendy’s hamburgers, (b) Wendy’s Coca-Cola. (c) McDonald’s Big Macs, (d) Mcdonald’s fries, and (e) Nike shoes?
A. Demand for Wendys hamburgers would drop because people would want to eat a cheapier chicken sandwich
B. Demand for Wendy’s Coca-Cola would go up.
C. Demand for Mcdonalds Big Macs would go down.
D. Demand for Mcdonalds fries would go down.
E. Nike shoes would stay the same.
5. Suppose you were shown a demand curve for bananas and were asked to calculate price elasticity of demand. Applying the appropriate equation, you came up with 0.80. Your friend was asked to derive price elasticit of demand on the identical demand curve and came up with 0.50. Worried, you asked your professor which of the two answers was correct. The professor checked through both calculations and said both were! How can that be?

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