Using the implied price elasticity relationship: to find the optimal price, we have assumed that elasticity is constant within a price range. However, we know that as price changes, elasticity also changes. So in practice, we need to solve the problem using an iterative or other mathematical methods. Assume a merchant sells a product at $100 and it costs him $80 to produce it. At the current price, the price elasticity is estimated to be 4.0. Using the implied price elasticity relationship, what would be the optimal price? Consequently, the price elasticity will be different from 4.0 at this price. Assuming the relationship between price and elasticity follows the following relationship: What are the optimal price and the elasticity at the optimal price? If you cannot solve this problem completely, formulate how this problem could be solved

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To solve this problem we need to use an iterative or mathematical method to find the optimal price w... View the full answer