Question 2: Calculation and analysis (8 Marks)
a. The store manager of an ice-cream shop in the Melbourne CBD experimented in changing the price of its vanilla ice-cream. He reduced the price of his vanilla ice-cream from $4.00 to $3.70 per cup. With the price reduction, the number of cups sold per week increased from 950 units to 1,100 units. Calculate the price elasticity of demand for the vanilla ice-cream using the information given. Display your working. Is the consumer demand for the vanilla ice-cream relatively price elastic or inelastic? Provide a reason for your selection