Mba Deli Case
Autor: djmiles • October 25, 2015 • Case Study • 523 Words (3 Pages) • 652 Views
Damian Miles
MBA Deli Case
Price Elasticity of Demand =
Price elasticity of demand (PED) measures the responsiveness of demand after a change in price.
- Formula - PED = % change in Q.D (Quantity Demanded)
% change in Price
Cost of each meal $6
The average number of meals sold per month is 7,000.
Price is lowered to $5 per meal in October the number of meals sold increases to 8,000.
- PED = % change in Q.D (Quantity Demanded)
% change in Price
% change in Q.D = +1000/7000*100 = 14.28%
% change in price = -1/6*100 = -16.66%
PED =14.28/-16.66 = - 0.85
This type of PED is coming negative it means it is inelastic demand
Revenue was = P*Q = 6*7000= $42000
Revenue now = P*Q = 5*8000=$40000
Thus revenue has lowered by $2000 as a result of price cut.
b.) Beatrice has calculated the fixed costs for the Deli are $14,000 per month. Each meal costs is reduced to $2.50 from the original price of $6
MBA Deli will sell 9,000 meals. The original Quantity was 7000
- PED = % change in Q.D
% change in Price
% change in Q.D = +2000/7000*100 = 28.57%
% change in price = -3.5/6*100 = -58.33%
PED =28.57/-58.33 = -0.48
This type of PED is coming negative it means it is inelastic demand
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