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What would happen to the number of sales

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1. American Sky Cuisine is one of five catering service companies that provide airline meals. The five companies are all about the same size, and produce similar products. The company sells approximately 200,000 meals per year. Based on market data the finance department has estimated the following price and cross-price elasticity of demand:

EPrice(d) = - 1.85 (price elasticity of demand for airline meals)

ECross-Price((d) = 0.45 (cross price elasticity of demand with respect to any other firm)

EPrice(D) = - 0.55 (price elasticity of demand if all prices are changed together)

Price elasticity of demand is the percentage change in quantity demanded resulted from one percent change in price

Formula: Price Elasticity (Ep) = % change in quantity demanded/ % change in price

a. What would happen to the number of sales if American Sky Cuisine decided to increase prices by 10 percent and no other firm changed its prices?

b. What should the company expect to happen if one of the rival companies were to raise their prices by 10 percent?

c. How would sales be affected if all firms decided to increase their prices by 10 percent?

Reference no: EM133079423

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