Demand of lemonade stands


Let us return to the condition with two lemonade stands, but this time their locations are fixed. The first stand is situated at the middle of beach, while the second stand is situated all the way at the far (right) end of the beach. How would the two owners set their prices to raise their profits? Suppose that the beach is one mile in length, there’re 120 consumers uniformly distributed along the beach, the consumers have the travel cost of $3/mile, and the lemonades are costless to manufacture. How many types of lemonade are sold by each stand? What are the realized profits for each owner?

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Macroeconomics: Demand of lemonade stands
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