imperfect competitive market
In the imperfect competitive market of jeans, Lean Jeans, Inc., recently offered rebates of $1 off the regular $50 price. Quantity sold jumped 4 more jeans from the previous 100 figure the previous month.
A. Calculate the arc price elasticity of demand for Lean Jeans.
Based on the previous question and using markup pricing,
B) If marginal cost per unit is $20, was the original $50 price optimal?
C) What would be the optimum price?
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Solution Preview
A. Given that there was a rebate of $1 off the regular price of $50, we can use the elasticity of demand formula to find the price elasticity of demand.
Price Elasticity of Demand = (% Change in Quantity)/(% Change in Price)
There are two ways to calculate this, the first is:
Price Elasticity of Demand = ...
Solution Summary
The optimum price is determined for an imperfect competitive market.