Financial economics calculation problems
Example:
Suppose you are the manager of a restaurant that serves an average of 400 meals per day at an average price per meal of $20. On the basis of a survey, you have determined that reducing the price of an average meal to $18 would increase the quantity demanded to 450 per day.
a. Compute the price elasticity of demand between these two points.
b. Would you expect total revenues to rise or fall? Explain.
