Reference no: EM131095075
A cafe catering for staff in a large corporation offers steak sandwiches and hamburgers as part of its menu.
a) Recently corporation staff were awarded a 7.5% wage rise. Since then the cafe manager has noticed that average daily sales of steak sandwiches increased from 54 to 60 and average daily sales of hamburgers increased from 88 to 93. Specify and calculate the elasticities that the cafe manager can use to explain these relationships. State whether steak sandwiches are a normal or inferior good. State whether hamburgers are a normal or inferior good. Explain your answers.
b) The cafe manager estimates that daily demand for steak sandwiches is represented by
Q = 121.67 – 6.67P where:
P = price per steak sandwich in dollars
Q = number of steak sandwiches sold per day.
Current average daily sales of steak sandwiches are 60. What price is the cafe currently charging for steak sandwiches?
c) The cafe manager notices that a nearby corner store is charging $8.50 per steak sandwich, and is contemplating whether to match the price. Would the cafe lose revenue on steak sandwich sales if it charged $8.50? Justify your conclusion based upon your estimate of the own-price elasticity of demand. Interpret the value and meaning of this elasticity (use the mid-point method to calculate the own-price elasticity of demand).
d) The cafe manager estimates that daily sales of hamburgers would decrease by 11.82% if the price of steak sandwiches was reduced to $8.50 Specify and calculate the elasticity that the cafe manager can use to explain this relationship between the price of steak sandwiches and hamburger sales. Interpret the value and meaning of this elasticity (use the mid-point method to calculate the elasticity).
e) Using the information from parts a), b), c) and d) of this question, provide a recommendation as to whether the cafe should reduce the price of a steak sandwich from $9.25 to $8.50 to increase total revenue? Use a price for hamburgers of $7.00 each (assume the supply of hamburgers is perfectly price elastic).
|
Do the gains out weight the losses
: Economically who benefits when retailers in Europe and the United States source textiles from low-wage countries such as Bangladesh? Who might lose? Do the gains out weight the losses?
|
|
Drop in export demand
: Now suppose the U.S. government wants to buy enough wheat to raise the price to $3.50 per bushel. With the drop in export demand, how much wheat would the government have to buy? What would be the cost to government?
|
|
What are the values for r-intercept and the Y intercept
: If C = 1000 + 0.75 x Disposable Income while investment is I = 2000 – 20r. If government expenditures are 0, the tax rate is 1/3, what is the equation of the IS curve? What are the values for r-intercept and the Y intercept?
|
|
Evaluate organization and making recommendations
: Your team is a group of consultants chartered with evaluating an organization and making recommendations for maintaining and improving effectiveness. Your team must present a summary of your findings to the management of the organization. Select a..
|
|
Large corporation offers steak sandwiches
: A cafe catering for staff in a large corporation offers steak sandwiches and hamburgers as part of its menu. Recently corporation staff were awarded a 7.5% wage rise. Since then the cafe manager has noticed that average daily sales of steak sandwiche..
|
|
Explain your thought process in distinguishing the examples
: How would you differentiate an invention from an innovation as it applies to science and technology? Provide two examples of each type and explain your thought process in distinguishing the examples provided.
|
|
Restrict the number of pretzel-stand licences
: a) Illustrate the current equilibrium in a two-part diagram with the entire market in one part and an individual pretzel stand in the other. b) Now the city decides to restrict the number of pretzel-stand licences, reducing the number of stands to..
|
|
Discuss the stakeholders involved in the project
: Task; Using an example, describe a project in terms that are common to most projects (600 words) List and discuss the stakeholders involved in the project (min 600 words) What elements need to be included in the project charter and what involvemen..
|