The market demand for a gallon of ice-cream is P = 10 - .05Q.
a. The producer wants to produce where the elasticity of demand is unity. What price should they charge and what quantity should be sold to achieve this goal?
b. One of the management group is arguing for a price reduction as a way to sell more gallons and increase income. Is this a good suggestion?
c. If there are no costs in selling ice-cream what price should a profit maximizer charge?