Reference no: EM1320185

Q. You are the manager for Dunkin Donuts also know the subsequent elasticities:

η= 1.5 η I = 1.2 η xy1 = 0.5 η xy2 = -0.5

η is the price elasticity of demand for Dunkin Donuts (DD) glazed doughnuts, ηxy1 is the cross elasticity of demand between DD glazed doughnuts also Krispy Kreme (KK) glazed doughnuts, ηxy2 is the cross elasticity of demand between DD glazed doughnuts also DD French Vanilla coffee also η I is the income elasticity of DD glazed doughnuts.

a) If you want to increase your sales of glazed doughnuts by 30%, in illustrate what direction also by Elucidate how much do you need to change the price?

b) If you make the percentage price change that you computed in part a) will total revenue increase or decrease? Elucidate how do you know?

c) Krispy Kreme lowers its price of glazed doughnuts by 20%. The demand for Dunkin Donuts glazed doughnuts will change by Illustrate what percentage also in Illustrate what direction?

d) Dunkin Donuts raises the price of its French Vanilla coffee by 15%. The demand for Dunkin Donuts glazed doughnuts will change by Illustrate what percentage also in Illustrate what direction?

e) If average income increases by 5% by Illustrate what percentage also in Illustrate what direction will the demand for Dunkin Donuts glazed doughnuts change? Are DD glazed doughnuts a normal good or an inferior good also Elucidate how do you know?