These questions require application of economic theory relating to elasticity of demand supply. All calculations must be shown in full. Answer ALL the questions. Q.3.1 A store that sells rice discovers that when the price of 1kg rice Is R24 per kilogram, the quantity demanded is 306 kgs per week. When the price decreases to R21 per kg, then the sales increase to 340 kgs per week. Use this information to answer questions Q.3.1.1 and Q.3.1.2 below. Q.3.1.1 Determine the price elasticity of rice using the Arc method. Q.3.1.2 Discuss the relationship between the price elasticity of rice and the total revenue the store received from the sales. Advise the store on an appropriate pricing strategy.

These questions require application of economic theory relating to elasticity of demand supply. All calculations must be shown in full. Answer ALL the questions. Q.3.1 A store that sells rice discovers that when the price of 1kg rice Is R24 per kilogram, the quantity demanded is 306 kgs per week. When the price decreases to R21 per kg, then the sales increase to 340 kgs per week. Use this information to answer questions Q.3.1.1 and Q.3.1.2 below. Q.3.1.1 Determine the price elasticity of rice using the Arc method. Q.3.1.2 Discuss the relationship between the price elasticity of rice and the total revenue the store received from the sales. Advise the store on an appropriate pricing strategy.

ECON MICRO

5th Edition

ISBN:9781337000536

Author:William A. McEachern

Publisher:William A. McEachern

Chapter5: Elasticity Of Demand And Supply

Section: Chapter Questions

Problem 1.1P: (Calculating Price Elasticity of Demand) Suppose that 50 units of a good are demanded at a price of...

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