economics exercise

QUESTION 2 (50 points) Part A (30 points) The owner of a restaurant is considering lowering menu prices to draw in more customers. He is debating between lowering the price for the steak dish or the salmon dish. When he lowered prices last year, a E2 decrease in price for the (15 steak resulted in a growth in steak sales from 75 per week to 100 per week. A 62.50 decrease in the price of the 617 salmon entree increased sales from 40 to 75 meals per week. (a) Calculate the price elasticity of demand for steak (show all calculations). (b) Calculate the price elasticity of demand for salmon (show all calculations). (c) Which dish should he choose to put on sale? Explain your answers with reference to the elasticity calculations in (a) and (b) above AND the application of the total revenue test. Part B (20 points) You are asked to advice on the relationship between two products. The only information you have is that if you increase the price of your product from $1.50 to (1.80, the demand for your competitor's product increases from 1,000 units to 1,300. What economic tool could you use to help provide advice? ) What is the relationship between your product and that of your competitor? ) What would be your short-run and long-run strategy? how all calculations