In this problem, you are going to be the CEO of the company.In anticipation of the upcoming quarterly disclosure of profits,you prepare your Board of Directors for the pressure that cost-push inflation is having on profits. There will be some erosion of profits.

Profile of the Company:

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 costs in every aspect of our operation as we have to put extra resources into protecting both our employees and the public.We are both fortunate and unfortunate that the price elasticity of demand for food is .20.

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 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?