Markup on Price

question 38

Essay

Markup on Price. TLC Tree Service, Inc., provides tree spraying services to residential customers in the Detroit area. The company recently raised its service price from $50 to $60 per tree. As a result, sales fell to 3,900 from 4,900 units in the prior year.
A. Calculate the arc price elasticity of demand for TLC service.
B. Assume that the arc price elasticity (from Part A) is the best available estimate of the point price elasticity of demand. If marginal cost is $12 per unit for labor and materials, calculate TLC's optimal markup on price and its optimal price.

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Definitions:

Land

An asset representing real estate property, excluding buildings or structures, used in accounting as a long-term asset.

Brokerage Commission

The fee charged by a broker for executing transactions or providing specialized services.

Outdoor Parking

An area designated for the parking of vehicles that is not covered or enclosed, typically found outside of buildings or in open spaces.

Fences

Physical structures that are erected to enclose or divide areas of land, often considered as land improvements in an accounting context.