TLC Lawn Care, Inc. provides fertilizer and weed control services to residential
ID: 1242519 • Letter: T
Question
TLC Lawn Care, Inc. provides fertilizer and weed control services to residential customers. Its seasonal services package, regularly priced at $250, includes several chemical spray treatments. As part of an effort to expand its customer base, TLC offered $50 off its regular price to customers in Lahania area. Customer response was enthusiastic, with sales rising to 5,750 units from the 3,250 units sold in the same period the previous month 1. Calculate price elasticity of demand for TLC service. 2.Calculate the optimal price for TLC service if marginal costis$135. **Please show ALL work - thank you**!Explanation / Answer
EP=(5,750 - 3, 250)X($200 + $250)/($200 - $250)X(5,750 + 3, 250) =-2.5 Optimal Markup on price=-1/-2/5 =0.4 or 40% MC = $135 Optimal Markup on price= P-MC/P where P is optimal cost 0.4=P-135/P P=225$
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.