Suppose You Are in Charge of Setting Prices at a Local

question 218

Multiple Choice

Suppose you are in charge of setting prices at a local ice cream shop.The business needs to increase its total revenue,and your job is on the line.You evaluate the data and determine that the price elasticity of demand for ice cream at your shop is 1.8.You should

• A)increase the price of ice cream.
• B)decrease the price of ice cream.
• C)decrease the cost of operating the ice cream shop.
• D)increase the price of bottled water also sold at the ice cream shop because its price elasticity of demand is 1.2.

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Definitions:

Consumption Bundle

A combination of different goods and services that an individual or a household consumes over a certain period.

Income On Food

The portion of an individual's or household's income that is spent on food and food-related expenses.

Shelter

A structure that provides cover or protection from weather, danger, or discomfort, often used as a term for housing or living spaces.

Budget Line

A graphical representation of all possible combinations of two goods that an individual can purchase with a given income, considering the prices of the goods.