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    Calculating Optimal Price Given Price Elasticity of Demand.

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    Given the price elasticity of demand for your product is 0.85, your marginal cost is 50 when you produce 1000 units, use the Lerner Index to calculate your price mark-up. What is your optimal price if you produce 1000 units?

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    Solution Preview

    The key formulas to solve this question are

    L = (P - MC)/P

    L = 1/E (or L = -1/E if you express ...

    Solution Summary

    The optimal price given price elasticity demand is calculated.

    $2.49

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