Answer to Question #82330 in Macroeconomics for muhammad UZair

Question

A local supermarket lowers the price of its vanilla ice cream from $3.50 per half gallon to
$3. Vanilla ice cream (unit) sales increase by 20 percent. The store manager notices that
the (unit) sales of chocolate syrup increase by 10 percent.
a. What is the price elasticity of vanilla ice cream?
b. Why have the sales of chocolate syrup increased, and how would you measure the effect?
c. Overall, do you think that the new pricing policy was beneficial for the supermarket?

Answer 1

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