You are the CEO of a company that sells coffee at small free standing shops arou

Question

You are the CEO of a company that sells coffee at small free standing shops around the country. The Board of Directors is considering increasing the number of locations in an effort to increase total revenue, ceteris paribus. Use the data below to determine if revenue is responsive to the number of locations. Use the midpoint method to calculate percentages. 2012 2013 Number of locations 3000 3750 Total Revenue $80 million $100 million Calculate the percentage change in locations and enter it below. Calculate the percentage change in total revenue and enter it below. Based on your analysis you report to the Board that total revenue is elastic with respect to the number of locations. Number Number total revenue is inelastic with respect to the number of locations. total revenue is unit elastic with respect to the number of locations.

Explanation / Answer

Percentage change in locations = 22%

Percentage change in total revenue = 22%

total revenue is unit elastic with respect to number of locations

Percentage change in locations using mid-point method 2012 2013 Average Number of locations 3000 3750 3375 % change ((3750 - 3000)/3375)*100 % change 22% Percentage change in total revenue using mid-point method 2012 2013 Average Total revenue 80 million 100 million 90 million % change ((100 - 80)/90)*100 % change 22% When a 1% change in number of locations produces a 1% change in total revenue, the total revenue is unit elastic with respect to number of locations

Percentage change in locations = 22%

Percentage change in total revenue = 22%

total revenue is unit elastic with respect to number of locations

Related Questions

Navigate

• Browse (All)
• Browse Y
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.