Question
I don't understand how to solve the following question, can you help? Palm restaurants are considered the gold standard for steak houses, with over 25
I don't understand how to solve the following question, can you help?
Palm restaurants are considered the gold standard for steak houses, with over 25 global locations, most in the U.S. The menu is the same at all locations, but prices may differ. For
example, in 2011, the price of a 9-ounce filet in one of the New York locations was $43, whereas in San Antonio, it was $41. You are an analyst that has been tasked with providing the fundamental economics underlying Palm's business.
Assume that variable and marginal costs are 20% higher in New York than in San Antonio, and that the own price elasticity of demand is -3 in New York and -4 in San Antonio. If the two locations are pricing optimally, by what percentage would we expect prices in New York to exceed those in San Antonio?
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