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    point price elasticity of demand

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    Markup on Cost. Brake-Checkup, Inc., offers automobile brake analysis and repair at a number of outlets in the Philadelphia area. The company recently initiated a policy of matching the lowest advertised competitor price. As a result, Brake-Checkup has been forced to reduce the average price for brake jobs by 3%, but it has enjoyed a 15% increase in customer traffic. Meanwhile, marginal costs have held steady at $120 per brake job.

    A. Calculate the point price elasticity of demand for brake jobs.

    B. Calculate Brake-Checkup's optimal price and markup on cost.

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    Solution Preview

    A. Calculate the point price elasticity of demand for brake jobs.
    Change in average price=-3%
    Change in quantity ...

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    The expert calculates the point price elasticity of demand in the case.

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