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Joe is evaluating the marketing strategy at his restaurant and inn. Suppose that in response to a $2.00 off sales promotion for spaghetti dinners, Joe finds that nightly dinner sales increase from 20 per night to 40. Normally, the dinners sell for $6.00.
a. What is the arc price elasticity of demand for Joe's spaghetti dinners?
b. Would Joe increase revenues by further reducing the price? What about profits? Explain.
Dynamics of Unemployment and Real Wages through Productivity Shocks The model that you are studying here is in the tradition of the real business cycle theory th
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