Compute the price elasticity of demand between these two points.
Would you expect total revenues to rise or fall? Explain.
Suppose you have reduced the average price of a meal to $18 and are considering a further reduction to $16. Another survey shows that the quantity demanded of meals will increase from 450 to 500 per day. Compute the price elasticity of demand between these two points.
Would you expect total revenue to rise or fall as a result of this second price reduction? Explain.
Compute total revenue at the three meal prices. Do these totals confirm your answers in (b) and (d) above?