Compute the price elasticity of demand for eggplants

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Reference no: EM131166400

Use the following information to answer the questions below. A local supermarket had been charging $2.00 a pound for eggplants and selling 200 pounds a week. When it raised the price to $2.50, eggplant sales fell to 190 pounds a week.

A. Compute the price elasticity of demand for eggplants. SHOW your work.

B. When the price rises from $2.00 to $2.50, does the supermarket’s revenue from eggplant sales increase, decrease or remain unchanged? Explain carefully, demonstrating your knowledge of the relationship between price elasticity of demand and sales revenue in 1-2 sentences. Hint: Did your result in Part A indicate that demand for eggplant is price inelastic or price elastic?

Reference no: EM131166400

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