(e) Auntie Anne’s Pretzels is experiencing a decline in same-store sales for Min
ID: 1135072 • Letter: #
Question
(e) Auntie Anne’s Pretzels is experiencing a decline in same-store sales for Mini Pretzel Dogs, falling
sales revenues, and inadequate profits. The average price of Cinnamon Sugar Pretzel Nuggets is
$4.99 and there are 2,500 Mini Pretzel Dogs sold daily on average. The estimated price elasticity of
demand is 1.5 and the stores are currently operating at an average of 75 percent of capacity.
What advice would you give to Auntie Anne’s Pretzels to increase same-store revenues and profits?
Explain.
Explanation / Answer
Ans:
In order to increase revenues and profits the same store should increase its sales by operating at 100 percent of capacity.
The price elasticity of demand is 1.5. it means the demand is elastic.when the demand is elastic a decrease in the price, increases the revenue and a increase in the price decreases the revenue.
The advice to Auntie Anne’s Pretzels would be to decrease the price and utilise the 100 percent of capacity.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.