microeconomics questions

1. Sally owns the Sweet Divine Chocolate store. She charges $15 per pound for her hand made chocolate. You, the economist, have calculated the elasticity of demand for chocolate in her town to be 3. If she wants to increase her total revenue, what advice will you give her and why? Explain your answer. (3 marks) 2. If the cross elasticity of demand between cocoa butter and milk is -1.15, then are peanut butter and milk substitutes or complements? Explain your answer. (2 marks) 3. When the price per cartoon of fruit called Apple falls from RM16 to RM 14, the quantity demanded increases from 200 to 300 cartons per week. The demand for another fruit juice called Orange falls from 250 to 200 cartons per week. (i) Calculate the price elasticity of demand using the midpoint formula. (3 marks) (ii) Calculate the cross price elasticity of demand between Apple and Orange. Based on the answer, explain the relationship between both. (4 marks)