Chapter 11 Cost Approaches to Pricing

Question 1

what is price elasticity of demand?

Answer 1

sensitivity demand is to change in prices

Question 2

what is price elasticity of demand formula?

Answer 2

(change in quantity / base quantity) / (change in price / base price)

Question 3

what is the price elasticity of demand formula mean?

Answer 3

if the result is greater than 1, the demand for the product is said to be elastic

Question 4

what is the two mark up approaches?

Answer 4

ingredient approach and prime ingredient approach

Question 5

what is ingredient approach?

Answer 5

considers all costs

Question 6

what is prime ingredient approach?

Answer 6

considers only the cost of major ingredient

Question 7

what is Hubbart Formula?

Answer 7

bottom-up approach to price rooms

Question 8

what does graph of menu engineering results look like?

Plow horses, Stars, Dogs, Puzzles

Answer 8

Items sell a lot but Gross margin is low = Plow Horses
Items sell a lot and Gross margin is high = Stars
Items don’t sell much and Gross margin is low = Dogs
Items don’t sell much but Gross margin is high = Puzzles