The postal service of St. Vincent, an island in the West Indies, obtains a significant portion of its revenues from sales of special souvenir sheets to stamp collectors. The souvenir sheets usually contain several high-value St. Vincent stamps depicting a common theme, such as the life of Princess Diana. The souvenir sheets are designed and printed for the postal service by Imperial Printing, a stamp agency service company in the United Kingdom. The souvenir sheets cost the postal service $1.20 each. St. Vincent has been selling these souvenir sheets for $7.00 each and ordinarily sells about 62,000 units. To test the market, the postal service recently priced a new souvenir sheet at $8.00 and sales dropped to 52,000 units.

Required:

1a. Calculate the contribution margin for sale price of $7.00 each or $8.00 each?

$8.00 Price $7.00 Price 62,000 Unit sales 52,000 Sales S 434.000 $ 416,000 74,400 Cost of goods sold Contribution margin 62,400 ................... $ 353,600 S 359,600 1b.Does the postal service of St. Vincent make more money selling souvenir sheets for $7.00 each or $8.00 each? $7.00 O $8.00 2. Estimate the price elasticity of demand for the souvenir sheets. (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 4 decimal places.) Price elasticity of demand 3. Estimate the profit-maximizing price for souvenir sheets. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Profit-maximizing price