The owner of an ice cream shop estimates that the own-price elasticity of demand for non-college...

 

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The owner of an ice cream shop estimates that the own-price elasticity of demand for non-college students at her shop is -2.33 for ice cream cones. Assume that the owner's marginal cost to produce an ice cream cone is constant at $2. The owner also notes that college students tend to come into the shop less frequently and they are more likely to purchase ice cream cones when they are discounted. The owner wants to create a student discount program where college students pay a lower price for ice cream cones in comparison to non-college students. She determines that profit-maximizing price for college students is $2.65 per cone. a. What price should the owner charge to non-college students if she wishes to maximize her profits? b. What does the owner estimate the own-price elasticity demand for college students to be at her shop? The owner of an ice cream shop estimates that the own-price elasticity of demand for non-college students at her shop is -2.33 for ice cream cones. Assume that the owner's marginal cost to produce an ice cream cone is constant at $2. The owner also notes that college students tend to come into the shop less frequently and they are more likely to purchase ice cream cones when they are discounted. The owner wants to create a student discount program where college students pay a lower price for ice cream cones in comparison to non-college students. She determines that profit-maximizing price for college students is $2.65 per cone. a. What price should the owner charge to non-college students if she wishes to maximize her profits? b. What does the owner estimate the own-price elasticity demand for college students to be at her shop?

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Ice Cream Shop Pricing Strategy a Price for NonCollege Students Profit Maximization To maximize prof... View the full answer