Asked by vanessa stouffer on Sep 24, 2024
Verified
The owner of a bakery decides to drop the price of lemon cakes by 5%,how much does quantity sold have to rise to stop the revenue from decreasing
A) 2%
B) 3%
C) 4%
D) 5%
Quantity Sold
The total number of units of a product or service that have been purchased by consumers during a specific period.
Lemon Cakes
A type of cake flavored with lemon, often featuring lemon zest or juice in the recipe for a tart flavor.
Revenue
The total income generated from the sale of goods or services before any expenses are subtracted.
- Comprehend the principles of price elasticity associated with demand and supply.
Verified Answer
DA
Daniel Andrade4 days ago
Final Answer :
D
Explanation :
To maintain the same revenue, the percentage increase in quantity sold must offset the percentage decrease in price. The formula to calculate the required increase in quantity is: (Percentage decrease in price / (100% - Percentage decrease in price)) * 100%. Plugging in the 5% decrease gives us (5 / (100 - 5)) * 100% = 5.26%. Since the options are rounded, a 5% increase in quantity sold is the closest to maintaining revenue.
Learning Objectives
- Comprehend the principles of price elasticity associated with demand and supply.