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Coffee and donuts in smalltown

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Reference no: EM131752188

Suppose Jen is the only supplier of both coffee and donuts in Smalltown. The cost of producing the goods is zero. Jen sells coffee for $3 and donuts for $3. In a typical hour, 5 costumers buy just one coffee, 4 buy just one donut, and 3 costumers buy one of each. The owner finds that those who buy only coffee would also buy a donut if the donut were $2. And those who buy only a donut would also buy coffee if the coffee were $1. If he is considering offering a coffee + donut bundle, so that consumers could buy either just coffee, just donuts, or both of them bundled together, what price for the bundle will maximize his profits?

Reference no: EM131752188

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