Optimal Price

question 37

Essay

Optimal Price. Last month, Forest Lumber, Inc. reduced the average price on the eight-foot pine 2´4s by 1%. In response, sales jumped by 4%.
A. Calculate the point price elasticity of demand for eight-foot 2´4s.
B. Calculate the optimal price for eight-foot 2´4s if marginal cost is $1.50 per unit.

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Definitions:

Reinforcement

In psychology, it refers to any stimulus that strengthens or increases the probability of a specific response.

Negative Reinforcement

A process in behavior analysis where a response is strengthened by stopping, removing, or avoiding a negative outcome or aversive stimulus.

Respondent Behavior

Behavior that occurs as an automatic response to a certain specific stimulus.

Seat Belt

A safety device in vehicles designed to secure the occupant against harmful movement that may result during a collision or a sudden stop.