Estimates the elasticity of demand

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Southwest jewelry estimates the elasticity of demand for their watches to be -3.2. The marginal cost to assemble each watch is $150. The current price per watch is $195. Is Southwest maximizing their profit? If not, how can they change their price to improve profits? If the cost of assembling the watches increases by 10%, should Southwest pass the cost to the customer entirely, partially or not at all?

Reference no: EM132422528

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