Reference no: EM1336760

Maximizing profit question

Imagine that we are selling bottles of CocaCola in a vending machine. Currently, we charge $1.50 per bottle and have found through trial-and-error that if we raise the price by 1%, the quantity purchased will change by approximately -2% (...in other words, ?=2). If it will cost us approximately $0.75/bottle to supply more Coke to our customers, what should we do if our goal is to maximize profit?

Choose one answer.
a. Raise our price. Even though that means we will sell less soda, we'll get more per bottle, so our profits will rise.
b. Raise our price. We'll sell more soda and generate more profit.
c. Lower our price. Even though that means we will sell less soda, we'll get more per bottle, so our profits will rise.
d. Lower our price. We'll sell more soda and generate more profit.
e. Do nothing.
f. More information is needed to answer this question.