Question: A chain cafe is faced with a critical financial problem. At present menu prices, the cafe only makes break-even at current price of Php 75.00 and they are able to sell 3,000 cups/year. The CEO of the cafe is thinking of increasing it's price by 25%. The financial analyst of the firm however, asks the CEO to consider the following before making a final decision: (1) price elasticity of coffee is 1.4 (2) income elasticity for coffee is + 1.17 (3) economy projection is good and that individual income is expected to increase by 8% (4) the cross elasticity of the cafe with the bakery next door is - 1.62 and they have recently increased their menu prices by 10%. If you are the CEO, how will you decide? Justify your decision. Show how your decision will affect the total revenue of your cafe. Question: Bukstor, the online bookstore, wants to increase its total revenue. One strategy is that it is considering is to offer a 15% discount on every book it sells. The bookstore has two (2) distinct groups of customers. The table below shows the response of the two groups to a survey they conducted. Group A (sales per week) Group B (sales per week) Quantity of sales before the 2.75 million 2.5 million 15% discount Quantity of sales after the 2.82 million 2.7 million 15% discount 1. Using the midpoint formula, calculate the price elasticities of demand for groups A and B 2. Explain how the discount will affect the total revenue from each group 3. Suppose Bukstor knows which group each customer belongs to when he logs on and can choose whether or not to offer the 15% discount. If Bukstor wants to increase its total revenue, should discounts be offered to group A or to group B, to neither group, or to both groups