Pick one of their products and calculate about the price elasticity of demand and the income elasticity of demand for that product. Justify your guess about how elastic the demand is with things you know about the product (for example, the demand for a product is likely to be very price elastic if there are many substitutes). Based on your estimate of price elasticity of demand what would you recommend as far as raising or lowering the price to enhance sales? (TR test).
Finally, identify some complements and substitutes for the product. How strong do you think the cross-price elasticities are likely to be? Based on what you have written, if you were selling this product, what measures, prices, or data would you try to keep track of if you wanted to predict how your sales might change over time?
Explain the nature of cost, fixed and variable, explicit and implicit and sunk cost for your business.
USE THE INFO BELOW TO SOLVE
Here is an example (see attached or below) from the Pub where the cost of a menu item increased, so we had to pass that cost along to the Customer:
Salmon Burger
Cost
Selling price
Food Cost %
Units sold
Oct-13
$1.60
$4.20
38.1%
176
May-14
$2.09
$4.20
49.8%
14-Oct
$2.09
$5.75
36.3%
141
AS you can see, raising the selling price from $4.20 to $5.75 helped our food cost but decreased the sales of this item from 176 in October 2013 to 141 in October of 2014.