Danny “Dimes" Donahue is a neighborhood's 9-year-old entrepreneur. His most recent venture is selling homemade brownies that he bakes himself. At a price of $1.75 each, he sells 250. At a price of $1.25 each, he sells 300. Instructions: Use the midpoint method and round your answer to two decimal places. Do not include a negative sign (-). a. What is the elasticity of demand? b. Is demand elastic or inelastic over this price range? O Inelastic O Elastic c. If demand had the same elasticity for a price decline from $1.25 to $0.75 as it does for the decline from $1.75 to $1.25, would cutting the price from $1.25 to $0.75 increase or decrease Danny's total revenue? Decrease O Increase

Danny “Dimes" Donahue is a neighborhood's 9-year-old entrepreneur. His most recent venture is selling homemade brownies that he bakes himself. At a price of $1.75 each, he sells 250. At a price of $1.25 each, he sells 300. Instructions: Use the midpoint method and round your answer to two decimal places. Do not include a negative sign (-). a. What is the elasticity of demand? b. Is demand elastic or inelastic over this price range? O Inelastic O Elastic c. If demand had the same elasticity for a price decline from $1.25 to $0.75 as it does for the decline from $1.75 to $1.25, would cutting the price from $1.25 to $0.75 increase or decrease Danny's total revenue? Decrease O Increase

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter3: Demand Analysis

Section: Chapter Questions

Problem 7E: In an attempt to increase revenues and profits, a firm is considering a 4 percent increase in price...

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Plot the price and quantity data given in the demand schedule of exercise 1. Put price on the vertical axis and quantity on the horizontal axis. Indicate the price elasticity value at each quantity demanded. Explain why the elasticity value gets smaller as you move down the demand curve.
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