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    Increasing Profits with a Price Elasticity of Demand

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    A company currently sells 60,000 units a month at $10 per unit. The marginal cost per unit is $6. The company is considering raising the price by 10% to $11. If the price elasticity of demand is _______________ in that price range, then profits would increase if the company decided to raise the price by 10%.

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    Solution Preview

    The price elasticity of demand tells us by how much demand will change, as a percentage, for each percentage point change in price. For example, if the PED is ...

    Solution Summary

    The solution discusses increasing profits with a price elasticity of demand in certain range.