1. The local JavaHouse has been selling 2,000 lattes per month for $3.99. When the JavaHouse increased the price to $4.99 they sold only 1,000 lattes.
   1. What is the price elasticity of demand?
   2. If the marginal cost is $3.00 per latte, was raising the price profitable? Use economic intuition and the simple pricing model to explain why or why not. For full credit, please discuss how elasticity and profit margin are related.

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Answer he price elasticity of demand is 1995 Since this value is greater than 1 in absolute terms de... View the full answer