Question 1. Just a year after you launched the expansion of DWJ, inflation has raised your marginal cost by 7% from $198.33 to $212.21. Your elasticity varies for each of the three regions in which you sell your DWJ brand. In the southwestern region, your elasticity is -2.76. In your upper-western region the elasticity is -3.50. In your New England region the elasticity is -5.76. a. %?Qd Southwestern = b. %?Qd Upper-western = c. %?Qd New England = Use %?Qd/%?P = e to estimate the percentage decrease in quantity demanded if you were to raise prices in all three regions by 7%. (Do not include the negative sign when recording your answer. Round to one decimal place, i.e. 10.135 is 10.1) Question 2. Your current prices are $311 in the southwestern region; $278 in the western-region and $240 in the New England region. Your marginal cost is now $212.21. Given the predicted changes in the quantity demanded by region per problem 1 and using the stay even analysis %?Qd = %?P/[%?P + ((P-MC)/P)], can you raise the price by 7% in any of the regional markets? State you conclusion and then show all the steps supporting your conclusion. Round to one decimal place, i.e. 10.135 is 10.1 (Note you are not being asked to compute the new price.).
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