Mangerial economics Question 7

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4. You work for Schooner Tuna, which produces foil packages and cans of tuna, both 5 ounces each. During an economic downturn your sales numbers are the following: Ocams PO fond Р Quarter 1 175,000 $1.50 100.000 $3.75 Quarter 2 180,000 $1.50 65.000 $3.75 Quarter 3 170,000 $1.50 80,000 $3.50 Your friendly neighborhood economist tells you that the consensus estimate that consumer income fell by 5% from Quarter 1 to Quarter 2, remained stable from Quarter 2 to Quarter 3, and you expect it to remain stable into Quarter 4 as well. When possible for the following, exact numbers are preferred. a. Set up and calculate as many are elasticities as you can. Be as clear as possible with both the set up and calculation of these. It may be helpful to write a one sentence summary of which numbers you are going to use to calculate these. b. What qualitative statements can you make based on these elasticities? (e.g., elastic, inelastic, substitutes, complements, inferior, normal.) Your boss asks you to estimate what price for canned tuna would achieve a sales goal of 175,000 units in quarter 4, given that your team has previously estimated an own-price arc elasticity of -0.372. What price should you tell your boss, and what is the managerial significance of such a price move? d. If instead the goal is to sell 100,000 foil packages of tuna, what price for foil packets will achieve this goal? What effect will selling these extra 20,000 foil packages of tuna have on the demand for cans? Be as precise as possible
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