Question
You have been asked to serve as a pricing consultant for the XYZ Factory, which is operated by Eb and Flo.Last month, they lowered the
You have been asked to serve as a pricing consultant for the XYZ Factory, which is operated by Eb and Flo.Last month, they lowered the price of a standard soup-and-sandwich lunch from $7.95 to $7.39.This was approximately a 7% decrease.In response to the price decrease, total sales revenue on the soup-and-sandwich lunch increased.Eb thinks that if they impose another 7% price cut (from $7.39 to $6.85), their total sales revenue on the soup-and-sandwich lunch will increase even further.Flo doubts whether this is true.They have asked you to settle the dispute.What can you tell them, based on sound economic reasoning?
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