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Shaun suggests that there wasn't enough time in the experiment. He estimates that in the second month, April, the Café will sell 26,000 meals at $7.50. Please answer the following assuming that Shaun is correct. You want to get an idea of what will happen to profits before you commit to an action. If profits go up when Shaun is correct, then you will keep the current price of $7.50. a. What would be the Price Elasticity of Demand if Shaun is correct? b. Is elasticity elastic, inelastic, or neither? c. What does this mean and why does it matter? d. Will Revenues increase or decrease as a result of the price cut at 26,000 meals? By how much? e. Beatrice has calculated the fixed costs for the Café are $18,000 per month and each meal costs $4.50. Will profits go up or down as a result of the price cut if Mt. Claire sells 26,000 meals? By How much?

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Operation Management, Management Studies

Category:- Operation Management
Reference No.:- M91703570

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