The Mag Transit owners see the change in profits from the price decrease in May and the projection for June. They decide to go back to a price of $10.00 and have 31,000 deliveries in June. They decide that they are only willing to manage enough messengers to support 31,000 deliveries at a price of $10.00. However, if they raised price to $11.00 per meal, they would be willing to hire and manage enough messengers to make 45,000 deliveries.
Calculate the Elasticity of Supply. Is it elastic or inelastic?
How many deliveries will Mag Transit have at a price of $11.00? Hint: you can only sell what customers will buy. Use the original the elasticity of demand calculated in 1 above.
What will be the Revenue?
What will be the Profit?
Should Really Mag Transit Owner Company raise the price to $11.00? Why or why not?