Great Deal! Get Instant $10 FREE in Account on First Order + 10% Cashback on Every Order Order Now

You are the manager for Dunkin Donuts and know the following elasticities: ?= 1.5 ? I = 1.2 ? xy 1 = 0.5 ? xy 2 = -0.5 ? is the price elasticity of demand for Dunkin Donuts (DD) glazed doughnuts, ? xy...

1 answer below »
You are the manager for Dunkin Donuts and know the following elasticities:
?= 1.5 ? I = 1.2 ? xy1 = 0.5 ? xy2 = -0.5
? is the price elasticity of demand for Dunkin Donuts (DD) glazed doughnuts, ?xy1 is the cross elasticity of demand between DD glazed doughnuts and Krispy Kreme (KK) glazed doughnuts, ?xy2 is the cross elasticity of demand between DD glazed doughnuts and DD French Vanilla coffee, and ? I is the income elasticity of DD glazed doughnuts.
  1. If you want to increase your sales of glazed doughnuts by 30%, in what direction and by how much do you need to change the price?

  1. If you make the percentage price change that you calculated in part a) will total revenue increase or decrease? How do you know?
  1. Krispy Kreme lowers its price of glazed doughnuts by 20%. The demand for Dunkin Donuts glazed doughnuts will change by what percentage and in what direction?
  2. Dunkin Donuts raises the price of its French Vanilla coffee by 15%. The demand for Dunkin Donuts glazed doughnuts will change by what percentage and in what direction?

  1. If average income increases by 5% by what percentage and in what direction will the demand for Dunkin Donuts glazed doughnuts change? Are DD glazed doughnuts a normal good or an inferior good and how do you know?
005_bmpk9pk-euf1bhmk.docx
Answered Same Day Dec 21, 2021

Solution

Robert answered on Dec 21 2021
136 Votes
You are the manager for Dunkin Donuts and know the following elasticities:
η= 1.5 η I = 1.2 η xy1 = 0.5 η xy2 = -0.5
η is the price elasticity of demand for Dunkin Donuts (DD) glazed doughnuts, ηxy1 is the cross
elasticity of demand between DD glazed doughnuts and Krispy Kreme (KK) glazed doughnuts, ηxy2
is the cross elasticity of demand between DD glazed doughnuts and DD French Vanilla coffee, and η
I is the income elasticity of DD glazed doughnuts.
a) If you want to increase your sales of glazed doughnuts by 30%, in what direction and by how
much do you need to change the price?
Answer: [Here I assume that here glazed doughnuts means only Dunkin Donuts (DD) glazed
doughnuts]
We need to reduce the price of glazed doughnuts to increase its sale.
Required % decrease in price = % increase in sales required/ price elasticity of demand for glazed
doughnuts =...
SOLUTION.PDF
SOLUTION.PDF

Answer To This Question Is Available To Download

Related Questions & Answers

More Questions »

Submit New Assignment

Copy and Paste Your Assignment Here
Attach File