Question: Assume that the marginal cost to a grocery of selling
Assume that the marginal cost to a grocery of selling a bottle of salad dressing to customers who use coupons versus those who don’t is identical and equal to $ 1.50. If the elasticity of demand of coupon users is 5 versus 1.25 for noncoupon users, how much of a per-unit discount should the store make available through coupons? What if coupon users have a demand elasticity equal to 2 versus 1.25 for noncoupon users?
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