Reference no: EM13389881

A number of towns in the United States have begun charging their residents for garbage pickup based on the number of garbage cans filled per week. The town of Chace decided to increase its per can price from 10 cents to 20 cents per week. In the first week Chase found that the number of cans that were brought to the curb fell from 550 to 525 (although city workers complained that the cans were heavier). A senior seminar economics class ran the numbers, informed their professor that demand for disposal was inelastic, and wrote a letter that recommended that the city raise the price more to maximize town revenue from the program. At the end of the next senior seminar, one year later, the new class discovered that, at a price of 30 cents per can, the number of cans has fallen to 125 and two revenues are down. (A) Compute the price elasticity of demand in the first and second cases. (B) Explain what may have happened, including factors that affect price elasticity of demand.