Answer to Question #251620 in Microeconomics for Lost

Question

Jim and Jane have opened a new restaurant in town, JJ's Burgers. Given what you know about price elasticity of demand is Jim correct that a price increase would bring in more money? The burger sells for $10 and 200 sell each week. What is the total revenue of the burgers? Having a 10% price increase raises the price to $11. If you sell 160 burgers a week what is the % change in the quantity demanded af the prices changes? What is the price elasticity of demand? Is the price elasticity elastic or inelastic? What is the total revenue after the price increase.

Answer 1

a.

Jim is wrong. Price increase will reduce the quantity demanded.

b.

Total revenue$=price\times quantity=200\times 10=\$2000$

c.

$160-200=-40\\\frac{40}{200}\times100=-8\%$

c.

Price elasticity of demand$=\frac{\Delta price}{\Delta quantity}$

$=\frac{-8}{10}=-8$

d.

$total \space revenue=price\times quantity\\=11\times160\\=1760$