Question

3. The marketing people at Ben and Jerry's Ice Cream Company believe that if they lower the price of their Cherry Garcia flavor ice cream by 25%, the quantity demanded will increase by 5%. a). What is the price elasticity of demand? (show your calculation) (2 points) b). If they are correct in their belief, what will happen to their total revenue? Increase or Decrease? Justify your answer. (2 points) 4. When the price of milk rose 50%, the quantity of milk sold fell 25% and the sale of breakfast cereal also fell 25%. a) Calculate the price elasticity of demand for milk. Show you calculation. (2 points). b) Calculate the cross elasticity of demand for breakfast cereal. Show your calculation. (2 points).

          3. The marketing people at Ben and Jerry's Ice Cream Company believe that if they lower
the price of their Cherry Garcia flavor ice cream by 25%, the quantity demanded will
increase by 5%.
a). What is the price elasticity of demand? (show your calculation) (2 points)
b). If they are correct in their belief, what will happen to their total revenue? Increase or
Decrease? Justify your answer. (2 points)
4. When the price of milk rose 50%, the quantity of milk sold fell 25% and the sale of
breakfast cereal also fell 25%.
a) Calculate the price elasticity of demand for milk. Show you calculation. (2 points).
b) Calculate the cross elasticity of demand for breakfast cereal. Show your calculation.
(2 points).

3. The marketing people at Ben and Jerry's Ice Cream Company believe that if they lower
the price of their Cherry Garcia flavor ice cream by 25%, the quantity demanded will
increase by 5%.
a). What is the price elasticity of demand? (show your calculation) (2 points)
b). If they are correct in their belief, what will happen to their total revenue? Increase or
Decrease? Justify your answer. (2 points)
4. When the price of milk rose 50%, the quantity of milk sold fell 25% and the sale of
breakfast cereal also fell 25%.
a) Calculate the price elasticity of demand for milk. Show you calculation. (2 points).
b) Calculate the cross elasticity of demand for breakfast cereal. Show your calculation.
(2 points).

Added by Richard W.

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