3. The olde yogurt Factory has reduced the price of its popular Mmmm Sundae from $2.25 to $1.75. as a result the firm daily sales of these sundaes have increase from 1, 500/day to 1,800/day. Compute the arc price elasticity of demand over this price and consumption quantity range.
4. The subway fare in your town has just been increased from a current level of 50 cent to $1.00 per ride. As a result the transit authority notes s a decline in ride ship of 30 percent.
A. compute the price elasticity of demand for subway rides
B. if the transit authority reduces the fare back to 50 cents, what impact would you expect on the ridership? Why?
7. In an attempt to increase revenues and profits, a firm is considering a 4 percent increase in price and an 11 percent increase in advertising. If the price elasticity of demand is -1.5 and the advertising elasticity of demand is +0.6, would you expect an increase or decrease in total revenues?