Question: gemmas kitchen is a small caf based in sydney that...
Gemma’s Kitchen is a small café based in Sydney that earns the majority of its income from the burgers it produces and sells. The arrival of COVID-19 has brought financial hardship for the café, as it has for many other retailers and restaurateurs.
Assume that when the price of burgers increases by 15%, the quantity of burgers demanded declines by 20%. Gemma is seeking some financial advice regarding how she might increase the revenue generated by her café by altering the price she charges customers for the burgers she makes.
What would you advise her? Should she raise or lower the price of burgers? With the aid of a diagram, explain with reference to the price elasticity of demand.