Reference no: EM132856862

Cecile owns an ice cream stand that she operates in Boracay. Her store caters primarily to tourists visiting during holidays. Cecile is unsure of how she should price her ice cream cones and has experimented with two prices in successive weeks during the busy season. The number of people who entered the store was roughly the same each week. During the first week , she priced the cones at P17.90 and 860 cones were sold. During the second week, she priced the cones at P13.90 and 1, 340 cones were sold. The variable cost of a cone is P4.10 and consists solely of the costs of the ice cream and of the cone itself. The fixed expenses of the ice cream stand are P425 per week.

Required:

problem 1. Estimate the price elasticity of demand for the ice cream cones.

problem 2. Estimate the profit maximizing price for ice cream cones.