Question
Q13) (Fill in the black and show working out): You run a small pizza shop named Pizza Hat. Initially you sold pizzas for $15 and
Q13) (Fill in the black and show working out):
You run a small pizza shop named Pizza Hat. Initially you sold pizzas for $15 and every week you sold around 600 pizzas. Each pizza costs you $6 to make. One day you decided to offer discounts to customers to see if you can boost sales significantly. So you slashed the price to $13.5, and it turned out that you can sell 90 more pizzas. Hence you conclude that the elasticity of demand for your pizzas at $15 is ________. Suppose the elasticity of demand is constant (does not vary with price). In order to maximize the profits, you should set the price at $_________.
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