⦁ Evaluate in the take-out food delivery industry which would include Grub Hub, Door Dash, Postmates, Uber Eats, etc. The following excerpt from Grub Hub’s 10-k describes how revenues are generated: More information on the industry can be found in the business section of GrubHub’s 10k here:
⦁ What is Grub Hub’s generic strategy?
⦁ See ⦁ http://www.ws⦁ j⦁ .com/articles/soda-co⦁ n⦁ sumption-falls-after-special-tax-in-california-city-1471982400 for a discussion of the impact of an increase in price (via a tax instead of a price increase that would provide revenue to the seller).
⦁ What would be the price elasticity of demand for the example given in Mexico where a 10% tax resulted in a 6% decrease in demand? Would we describe that as unitary elastic, elastic or inelastic?
⦁ What do you think makes the soft drink industry this way (elastic or inelastic)?
⦁ Assume instead that it was a 10% price increase in the form of added revenue to the seller. Would the seller’s revenue go up or down as a result of this price increase? Use a simple example of a company selling 100 units at $1 prior to the price increase to demonstrate the answer.
⦁ Now assume that the price elasticity of demand is 1.1. Would the seller’s revenues go up or down as a result of the 10% price increase?