I your are going to be the CEO of a company.In anticipation of the upcoming quarterly disclosure of profits,you are Board of Directors for the challenge that cost-push inflation is having on profits.Pleasemake yourself CEO of only one of these hypothetical companies.

Profile of the Companies

All America Grocery Inc- We serve communities in the middle of the income market providing low prices for all basic grocery needs.Our modest income consumers expect goods deals on good quality foods.TheCovid-19 pandemic has putupward pressure on the price of everything we sell. We are also experience rising cost in every aspect of our operation as we have to put extra resources in to protecting both our employees and the public.We are both fortunate and unfortunate that the price elasticity of demand for food is .20.

Very Big US Auto-Very Big US Auto is one of the oldest and one of the largest auto manufacturers of autos in the US.Very Big US Auto's supply chain is highly dependent components manufactured in China and assembled in the US.The Chinese has rebounded quickly, much of the production capacity is still going torebuild inventories so the supply of components still lag behind demand.Additionally manufacturing facilities like ours must take extra precaution to keep workers safe.Costs are rising on all aspects of production across the industry.Given these supply side factor, weknow that the supply of auto is relatively inelastic.On the demand side, Very Big US Auto knows thatdemand is relatively elastic with a priceelasticity of demand of1.2. But we also know that pandemic has made some transportation substitutes less acceptable.

Big Time Entertainment- Big Time Entertainment is a nationwide firm providing movies, arcades and other entertainmentvenues such as bowling and roller skating.Our operations have been heavily impacted during theCovid-19 pandemic.Onreopening we have been faced with a host of regulations that havegreatly increased our cost of operations. We also face uncertainty as to the potential for additional shutdowns. Customers are fearful plus theguidance onoperating our facilities means we are operating far below our optimal number of patron to cover the higher cost for cleaning and other measure to protect the public and our employees.Price elasticity of demand is 1.6 and we are also faced with more competitors,onlineentertainment and gaming, that are not experiencing these cost pressures.

Now explain:

• Is the demand curve for your product relatively elastic,inelastic or unitary elastic?Demonstrate for your company's product,by how much the quantity demanded will change if you pass on a 10%increase in cost.In other words,show your calculation of the percentage change in the quantitydemanded if your prices are raised by 10%.You must provide a calculations showing the percentage change in quantity demanded.
• Given your company's price elasticity of demand and the industry supply/competitive environment you face prepare a statement for your board as to the potential impact on profits.Who will pay the larger share of the cost increases,your firm or your customers?