Question
Microeconomic decisions in the Real World Situation Two: (3 marks) It is a hot July day and your 10-year-old relative wants to set up a
Microeconomic decisions in the Real World
Situation Two: (3 marks)
It is a hot July day and your 10-year-old relative wants to set up a lemonade stand. You think that is a great idea and help them mix up a batch of lemonade. You set up a stand and set the price of one glass of lemonade at $1 dollar per glass. Business is good, but then you notice another kid down the block has also set up a lemonade stand. They price their lemonade at 75 cents per glass. Business drops off immediately...now what?
Questions:
- What options does your little relative have?
- What do you advise your little relative to do?
- What price would you recommend they set after the competitor sets up their stand?
Hint: Relate all your answers to supply and demand.
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