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28. Articulate your response to both of the following two managers?

Manager 1: "The only way we can increase the revenue we receive from selling our frozen pizzas is by cutting the price."

Manager 2: "Cutting the price of a product never increases the amount of revenue you receive. If we want to increase revenue, we have to increase price."

29. An ongoing policy debate concerns whether to legalize the use of drugs such as marijuana and cocaine. Some researchers estimate that legalizing cocaine would cause its price to fall by as much as 95 percent.

Proponents of legalization argue that legalizing drug use would lower crime rates by eliminating the main reason for the murderous gang wars that plague many big cities and by reducing the incentive for drug addicts to commit robberies and burglaries.

Opponents of legalization argue that lower drug prices would lead more people to use drugs.

a) Suppose the price elasticity of demand for cocaine is -2. If legalization causes the price of cocaine to fall by 95 percent, what will be the percentage increase in the quantity of cocaine demanded?

b) If the price elasticity is -0.02, what will be the percentage increase in the quantity demanded?