Sea Breeze Taffy is a shop located in Atlantic City along the boardwalk. It makes and sells taffy in a variety of flavors. Revenue and cost data for a recent week appear here:

All employees work standard shifts, regardless of how much fudge is produced or sold. Jasmine, the shop€™s manager, estimates that if she were to decrease the price of taffy by $0.60 per lb. to a new price of $5.40 per lb., weekly volume would increase by 20%.

REQUIRED
A. Calculate the price elasticity of demand.
B. Calculate the profit-maximizing price
C. Based on the profit-maximizing price, does it appear that Jasmine should drop the price of the taffy? Why or why not?
D. List possible relevant factors that could influence Jasmine€™s price decision. List as many factors as youcan.

Transcribed Image Text:

Revenue (1,500 lbs Cost of ingredients Rent Wages $6.00 per lb) $9,000 $2,400 800 3,200 6,400 $2,600 Pretax income