Final answer:
When the elasticity of demand is 1.4, the company should lower the price to maximize revenue. A high gasoline price elasticity of supply would increase costs for companies like UPS and FedEx. The income elasticity of bread consumption indicates that bread is an inferior good.
Step-by-step explanation:
If the elasticity of demand for the pharmaceutical company's product at the current price is 1.4, it would be advisable to lower the price. An elasticity of 1.4 indicates that demand is relatively elastic, meaning that a decrease in price will lead to a larger increase in quantity demanded and therefore higher revenue for the company. On the other hand, if the elasticity were 0.6 or 1, it would be advisable to keep the price the same or raise the price respectively. A lower elasticity indicates inelastic demand, where changes in price have a smaller effect on quantity demanded.
The gasoline price elasticity of supply refers to how sensitive the quantity of gasoline supplied is to changes in price. For companies like UPS and FedEx, a high price elasticity of supply for gasoline would mean that they can expect a significant increase in the price of transportation, which will likely have a negative impact on their cost of operations. They might need to pass on these increased costs to customers in the form of higher shipping prices.
The income elasticity of bread consumption can be calculated by dividing the percentage change in the quantity of bread consumed by the percentage change in income. In this case, the income elasticity is approximately -0.667, indicating that bread is an inferior good. As income rises, the quantity of bread consumed falls, suggesting that consumers are switching to higher-priced goods as their income increases.