John Simms a new employee at Zoey’s Frozen Foods estimates that the price elasticity of demand for Zoey’s Frozen Pizzas to be -1.23, as compared to a price elasticity of demand for frozen pizzas in general of -2.34. In light of the relative inelasticity of Zoey’s Frozen Pizza's, John recommends raising the price to increase sales revenues. You, a more experienced member of the firm, are suspicious of John's estimate, and are skeptical of his recommended plan of action? Why? (Hint: Think about the determinants of price elasticity of demand).

Reason to suspect John’s estimate: _____________________________________

Reason to doubt John’s plan of action: __________________________________

Answer rating: 100% (QA)

Solution So first we will talk about what is Price Elasticity of Demand PED It basically is a measur... View the full answer