Analysis of Pricing: You manage MBA Deli which sells meals at a price of $6 each. The average number of meals sold per month is 7,000. MBA Deli would like to increase its sales and profits. The MBAs running the Deli, know that if price is lowered, they will sell more meals. So they run an experiment. Price is lowered to $5 per meal in October and the number of meals sold increases to 8,000.
Warren suggests that there wasn’t enough time in the experiment. He estimates that in the second month, MBA Deli will sell 9,000 meals. Please answer the following assuming that Warren is correct.
Will Revenues increase or decrease as a result of the price cut? By How much?