This year, McDavid's decided to reduce the price of the "Big Dave" from $5 down to $4. Ronald
McDavid thought that this might increase the volume of sales. He was correct. The lower price
increased demand "Big Daves” from 10,000 to 20,000 during the year. His rent, and the cost of
employing the two part time workers did not change. In addition, his decision to change the price
of the "Big Dave" did not affect the sales of "Pip-Squeak” burgers. The number of Pip-Squeaks
sold, their price, and their cost were exactly the same as last year. Since Ronald McDavid lives
off of the profit from his business, the decision to lower the price the "Big Dave” was:
a good idea - the business made a larger profit.
a bad idea - the business made a lower profit.
neither a good nor bad idea - the profit stayed the same.
we don't have enough information to know.