Elasticity Problem 3 Ben and Jerry's is a popular brand of ice cream based in South Burlington, VT. They are known for t

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Elasticity Problem 3 Ben And Jerry S Is A Popular Brand Of Ice Cream Based In South Burlington Vt They Are Known For T 1 (157.4 KiB) Viewed 18 times

Elasticity Problem 3 Ben And Jerry S Is A Popular Brand Of Ice Cream Based In South Burlington Vt They Are Known For T 2 (231.33 KiB) Viewed 18 times

Elasticity Problem 3 Ben and Jerry's is a popular brand of ice cream based in South Burlington, VT. They are known for their delicous and cleverly named flavors and their committment to social responsibility. Suppose the marketing department for a firm like Ben and Jerry's estimates monthly demand for a pint of ice cream to be Q = 1050 - 125P. a) Using the table provided and Excel functions, calculate quantity demanded for each of the prices given. b) Using the prices provided and quantity demanded you calculated in part a, calculate elasticity (in absolute terms) for each point along the demand curve. Price, $ 6.50 6.25 6.00 5.75 5.50 5.25 5.00 Elastic Inelastic a) Quantity Price (P) = Quantity (Q) =| Revenue = b) 4.75 4.50 4.25 4.00 3.75 3.50 c) At which prices is demand elastic, inelastic, and unit elastic? Enter your answers using cell references to the table above. Price From Q 1050 125 P Elasticity Price To The demand is unit elastic at some price between and d) Are there prices between $3.50 and $6.50 which you are certain the company should not charge based on the elasticities you observe? Assume your ice cream must be priced in $.25 increments. The company should not charge below e) If the goal of this firm was to maximize revenue, what price would you recommend they charge for a pint of ice cream? Use functions and Excel's Solver functionality.

Project In this problem, you will investigate the elasticity of demand for a given set of prices and demand expression. Then you will use Excel's Solver Add-in to maximize revenue. For the purpose of grading the project you are required to perform the following tasks: Step Instructions Description: 1 Start Excel. 2 In cell D10, by using absolute and relative cell references, calculate the quantity corresponding to price in cell C10. Use cells F7, H7, and C10. Copy the formula from cell D10 down the column to cell D22. In cell E10, by using absolute and relative cell references, calculate the elasticity corresponding to price and quantity in cells C10 and D10. Use cells H7, C10, and D10. Copy the formula from cell E10 down the column to cell E22. 3 Note: Enter the elasticity as an absolute value. In cells D25 and E25, by using cell references, enter the range of prices from cells C10-C22 for which the demand is elastic. Note: The range of prices must go from the lowest to the highest value. In cells D26 and E26, by using cell references, enter the range of prices from cells C10-C22 for which the demand is inelastic. Note: The range of prices must go from the lowest to the highest value. In cells 127 and K27, by using cell references, enter the range of two consecutive prices from cells C10-C22 between which lies the price for unit elastic demand. Note: The range of prices must go from the lowest to the highest value. 7 In cell 129, by using a cell reference, determine the price from cells C10-C22 below which the company should not charge. Prepare cells D32 and D33 to use the Solver Add-in. 8 In cell D32, by using cell references, calculate the Quantity corresponding to price in cell D31. Use cells H7, F7, and D31. In cell D33, by using cell references, calculate the revenue for the given price and quantity. Use cells D31 and D32. Use the Solver Add-in to find the price that maximizes profit. Using Solver Add-in Select the Solver in the Analyze group of the Data tab of the Ribbon (note that you should add this Add-in in case you do not have it in the Data tab already). Choose cell D33 in the Set Objective field. Select the Max option below. Choose cell D31 in the By Changing Variable Cells field. There are no additional constraints. Make sure that the "Make Unconstrained Variables Non-Negative" box is checked. Leave the GRG Nonlinear solving method. Click Solve. In the popup window select the Keep Solver Solution option. Do not check any additional boxes and click OK. As the result, you will see the price in cell D31, that gives the maximum revenue. The values for quantity and revenue will update automatically. 10 Save the workbook. Close the workbook and then exit Excel. Submit the workbook as directed. Points Possible 0 2 2 2 2 2 1 2 0