Map dob Sapling Learning You are the CEO of a company that sells coffee at small
ID: 1142518 • Letter: M
Question
Map dob Sapling Learning You are the CEO of a company that sells coffee at small free standing shops around the country. The Board of Directors is considering increasing the number of locations in an effort to increase total revenue ceteris paribus. Use the data below to determine if revenue is responsive to the number of locations. Use the midpoint method to calculate percentages 2012 2000 2013 2500 Number of locations Total Revenue $60 million $75 million Based on your analysis you report to the Board that Calculate the percentage change in locationsa enter it below. Calculate the percentage change in total revenue and enter it below. total revenue is inelastic with respect to the number of locations. Number Number total revenue is elastic with respect to the number of locations. total revenue is unit elastic with respect to the number of locations.Explanation / Answer
Percentage change in locations = [(locations in 2013 - locations in 2012)/locations in 2012]*100
So, Percentage change in locations = [(2500 - 2000)/2000]*100 = (500/2000)*100 = 25%
Percentage change in total revenue = [(total revenue in 2013 - total revenue in 2012)/total revenue in 2012]*100
So, Percentage change in total revenue = [(75 - 60)/60]*100 = (15/60)*100 = 25%
total revenue is unit elastic with respect to the number of locations.
(as percentage change in locations = percentage change in total revenue)