Markup on Cost

question 46

Essay

Markup on Cost. Radon Detectives, Inc., offers radon testing to homeowners in the Bethlehem, Pennsylvania area. The company recently initiated a policy of matching the lowest advertised competitor price. As a result, Radon Detectives has been forced to reduce the average price for radon tests by 1%, but has enjoyed a 3% increase in demand. Meanwhile, marginal costs have held steady at $30 per test.
A. Calculate the point price elasticity of demand for radon tests.
B. Calculate Radon Detectives' optimal price and markup on cost.

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Definitions:

PR

Public Relations, the strategic communication process that builds mutually beneficial relationships between organizations and their publics.

Firms

Businesses or companies engaged in commercial, industrial, or professional activities.

PR Agency

A specialized organization that helps companies and individuals in effectively communicating and building a favorable public image through various media and communication strategies.

Private Corporation

A company owned by a small group of people or by a non-governmental organization, and its shares are not traded on public stock exchanges.