Question: 3. (6 points) Elasticities across the two locations Demand Function of San Antonio =D(q)= - ,q +16 Demand Function of Laredo = D(q) - 3

3. (6 points) Elasticities across the two locations Demand Function of San Antonio =D(q)= - ,q +16 Demand Function of Laredo = D(q) - 3 360 -q + 12 Profit Maximizing Price = $15.50 Profit Maximizing Quantity = 1,300 A. Calculate the point price elasticity of demand at the optimal price and quantity in Laredo B. Calculate the point price elasticity of demand at the optimal price and quantity in San Antonio C. Assuming that your marginal costs are $6, are you charging more, less, or exactly the optimal price in Laredo. Hint: Calculate markup on price (Lerner's index) D. Assuming that your marginal costs are $6, are you charging more, less, or exactly the optimal price in San Antonio. Hint: Calculate markup on price (Lerner's index)/ E. Based on your analysis, describe how you should adjust prices in Laredo and San Antonio

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