2. The Prairie Rose is considering selling their cinnamon rolls at gas stations. To attract more consumers, the Prairie Rose will have to lower their price of cinnamon rolls from $4 to $3. This decrease in price will increase the number of cinnamon rolls sold from 80 to 120. (** a. What is the elasticity of demand? () b. Are consumers sensitive or insensitive to the change in price? How do you know? pts) c. Will the total revenue generated from cinnamon rolls sales increase due to the change in price? ( d. Should the Prairie Rose change their price of cinnamon rolls? Justify your answer! (2

Essentials of Economics (MindTap Course List)
8th Edition
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter5: Elastic And Its Application
Section: Chapter Questions
Problem 6CQQ: Over time, technological advance increases consumers incomes and reduces the price of smartphones....
Question
2. The Prairie Rose is considering selling their cinnamon rolls at gas stations. To attract more
consumers, the Prairie Rose will have to lower their price of cinnamon rolls from $4 to $3. This
decrease in price will increase the number of cinnamon rolls sold from 80 to 120. (**
a. What is the elasticity of demand? ()
b. Are consumers sensitive or insensitive to the change in price? How do you know?
pts)
c. Will the total revenue generated from cinnamon rolls sales increase due to the change
in price? (
d. Should the Prairie Rose change their price of cinnamon rolls? Justify your answer! (2
Transcribed Image Text:2. The Prairie Rose is considering selling their cinnamon rolls at gas stations. To attract more consumers, the Prairie Rose will have to lower their price of cinnamon rolls from $4 to $3. This decrease in price will increase the number of cinnamon rolls sold from 80 to 120. (** a. What is the elasticity of demand? () b. Are consumers sensitive or insensitive to the change in price? How do you know? pts) c. Will the total revenue generated from cinnamon rolls sales increase due to the change in price? ( d. Should the Prairie Rose change their price of cinnamon rolls? Justify your answer! (2
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