| The DirectDelivery Case |
| After you complete your MBA you decide to open a business, named DirectDelivery. DirectDelivery is a courier service in Austin, TX which delivers packages within Austin city limits within half a day, door to door. The packages are delivered by taxi drivers, and customers are mainly law firms who want fast, secure delivery of important documents. Normally each delivery charge is | $15.00 |
| And the average number of deliveries per month is | 6,000 |
| But DirectDelivery would like to increase its volume, so this month it cut the price to | $12.00 |
| With the price cut, the number of deliveries increased to | 7,000 |
| Questions |
| 1. What is DirectDelivery’s elasticity of demand? |
| 2. Is demand elastic, inelastic, or neither? |
| 3. What does elastic, inelastic, or neither tell us about the elasticity of demand? |
| 4. Why does this matter? |
| 5. Have DirectDelivery’s profits increased or decreased as a result of the price cut? |
| 6. By how much? |
| 7. Was the price cut a success or failure? |
| 8. What price should DirectDelivery charge next month? | $12.00 | or | $15.00 |
| 9. Why? |
udontknowme1234
the_second_question_.xls
