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%.

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 youcan.

  • CreatedJanuary 26, 2015
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