1. Alpaca Chocolate Store sells hand-made chocolates at $15 per pound. For prices in the interval $15±2, the elasticity of demand for chocolate is measured to be 5. If you were to increase the store’s total revenue, what advice would you give to the store manager and why? Explain your answer.

2.the slope of the price-response function for a product at the current price of $75 is -$8 per unit. How much change in demand can be expected if the seller increases the price by $5?

Round your answer to the nearest integer.

3. The demand function for soda is d(p)=5000-2000p. What is the demand at $2.2?

Round your answer to the nearest integer.

4. Assume that the demand for french fries is 520 servings at 75 cents per serving but it drops to 500 servings at 79 cents per serving. The slope of the price-response function at these two price points is ————- servings per cent.

Round your answer to the nearest integer.

5. From which of the following data might you estimate a price elasticity of demand?

A.

a price hike from $8 to $12 causes monthly sales to fall from 15,000 shirts to 10,000 shirts

B.

the output of tennis balls slumps 8% when the prices of racquets go up 12%

C.

steel consumption rises 18% when national income grows 13%

D.

Ford’s production increases when Chevy sales fall because GM raises prices

E.

farmers sell 15% fewer bushels when the price increases by 5%

6.What is the optimal selling price for a service provider with a price-response function given by d(p)=280-12p. The service cost is $20 per customer.

(Round your answer to 3 decimal places)

7. Think of a service or product that can be priced based on the value-based pricing strategy. Write the name of the service/product that you’ve chosen and in a few sentences, explain why you think it is appropriate to use the value-based pricing strategy for it.

8.Calculate the percentage change in demand when past week’s sales are 260 units, and this week’s figure is 240 units.

(round your final answer to 3 decimal places)

9. The demand for Purell hand sanitizer rises from 2000 to 2500 bottles when the price falls from $3.75 to $3.00 per bottle. Find the price elasticity of demand for hand sanitizer at these price points.

Round your final answer to two decimal places.

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