Price Elasticity of Demand in Test Market FACTS: Friendly Markets supermarket chain recently performed an experiment in a test-market city (i.e. Cincinnati).
The supermarket chain varied the price of beef over the course of two weeks while holding all other prices constant. During the experiment, the supermarket chain captured the following data regarding the price of beef per pound and the quantity (in pounds) of beef purchased by customers in a given week.
Use the TOTAL REVENUE test to determine if the beef product described above is ELASTIC or INELASTIC. This test is described in the Elasticity chapter of our textbook. Show all your work and document all your logic below.
Calculate the PRICE ELASTICITY OF DEMAND (Ed) for this beef product. This formula appears in the Elasticity chapter of our textbook and in my video lessons on Elasticity. Use the “mid-point” approach that is described in the text. Show all your work and document all your calculations and logic below. Label all amounts. Be neat. Use a ruler. Use a pencil (not a pen). Erase–don’t cross out. Be sure your name appears on your work. Write legibly.
Your calculation of the price elasticity of demand (above) indicates that this beef product is INELASTIC or ELASTIC?
