Question

• 3. Suppose Jake, Jobu, and Jonathan own a craft brew startup, J³ Brew, selling homemade beer. Their unit cost is constant at MC=$2.70 per bottle. The last time they raised the price 1%, it resulted in a 1.90% change in quantity demanded. They are currently charging $5 for a beer.
  • a. Should they adjust their price from $5? What is the optimal price?
  • b. Now suppose the price of spring water goes up, increasing their MC to $2.95. What is the new optimal price?

Answer 1

Auswer Auswer 5 мі: ә•ю Price charged $5 Ололее м Р= 17. Одамое и слом ротолоleop = ) • 90°). o°o e last cho oтo иol = % оиде мачоulfң demanded % change in Price 5 €ля 1-40 •°. ea - - 4o using herner Under -> Price - Marginal lost Price Condition I led I 1 1 Е . - и ва 1 1

& in me real D 1 2 2.70 109- 1.9 P 0.9 D 0.98 - (2670 ) (1.90) Dooqp = 5.13 % P = 5013 Hence price is $5.7 Coptimal Price). Yes they should adjust the price by 0.78. by Now Me'- $2.95 - 11111

& I-Dogs 2 > -tao gol apo 1090 0.qp a 2.95 1.9 33 0.9 p > (2095)(1.90) 70.qp 25.605 2 Pz $6.28 (approx) i optimal price is $6.28 when MC is $2095.