What is the arc price elasticity of demand, Managerial Economics

1. Joe is evaluating the marketing strategy at his restaurant and inn. Suppose that in response to a $2.00 off sales promotion for spaghetti dinners, Joe finds that nightly dinner sales increase from 20 per night to 40. Normally, the dinners sell for $6.00.

a. What is the arc price elasticity of demand for Joe's spaghetti dinners?

b. Would Joe increase revenues by further reducing the price? What about profits? Explain.

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