Market–based price (elasticity formula), other pricing factors Sea Breeze Taffy is a shop located in Atlantic City
along the boardwalk. It makes and sells taffy in a variety of flavors. Revenue and cost data for a recent week appear
here:All employees work standard shifts, regardless of how much fudge is produced or sold. Jasmine, the shop’s manager,
estimates that if she were to decrease the price of taffy by $0.60 per lb. to a new price of $5.40 per lb., weekly volume
would increase by 20%.
REQUIRED
:
• A. Calculate the price elasticity of demand.
• B. Calculate the profit–maximizing price
• C. Based on the profit–maximizing price, does it appear that Jasmine should drop the price of the taffy? Why or why not?
• D. List possible relevant factors that could influence Jasmine’s price decision. List as many factors as you can
