Suppose Mariah wants to know if she has priced her designer backpacks well. Each backpack costs $50 to make. At the original price of $110, she sold 80 backpacks a month. In order to learn whether or not this is the correct price, Mariah decides to do experiment. She lowers the price to $90 for one month and finds that 120 backpacks are sold that month. Thanks to this experiment, Mariah knows two points on the demand curve, instead of one!

1. (a)(2 points) What is the mark-up at the original price?
2. (b)(2 points) Using these two points on the demand curve, what is the elasticity of demand when price is $110?
3. (c)(2 points) What recommendation can you make to Mariah about how to price her backpack? Explain your answer in one or two sentences.