Introduction: It is April andyou have recently been hired as the manager of Saco Atlantic Truffle Company in Springvale, Maine.You have been asked to improve profitability.The company got its name from a proprietary caramel truffle first sold in a coffee shop also owned by the Hill family.

1. (30 points) Analysis of Pricing: You manage The Saco Atlantic Truffle Company which makes a chocolate - caramel truffle for sale to gift shops from Cape Cod to Mount Desert Island near Bar Harbor Maine. In 2017, the company sold individually wrapped candies in boxes of 25 for $51.00 each.The candies retail for $4.49 for an individual piece and sales have been strong.The owners of Saco would like to increase its sales and profits.They know that, if price is lowered, they will generate more sales.Sales are typically steady at 70,000 boxes per month from May through October. Last year they sold 70,000 boxes in May.So they run an experiment.Price is lowered to $46.00 per box in May of this year and the number of deliveries increases to 75,000.
2. What is the Price Elasticity of Demand?
3. Is elasticity elastic, inelastic or neither?
4. What does this mean and why does it matter?
5. Will Revenues increase or decrease as a result of the price cut? By How much?