Use mid-point method to calculate price elasticity of demand

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Reference no: EM131098652

Part A)

The cafe manager estimates that daily demand for cakes is represented by

Q = 121.67 – 6.67P where:

P = price per cake in dollars

Q = number of cakes sold per day.

Current average daily sales of cakes are 60. What price is the cafe currently charging for cakes?

Part B)

The store manager notices that a nearby store is charging $8.50 per cake, and is contemplating whether to match the price. Would the store lose revenue on cake sales if it charged $8.50? Use the mid-point method to calculate the price elasticity of demand.

Reference no: EM131098652

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