please i need an answer for e only ( part : e ) only Lizzie\'s Lingerie started

Question

please i need an answer for e only ( part : e ) only

Lizzie's Lingerie started selling robes for $36, adding a 50 per cent mark-up on cost. Costs were estimated at $24 each: the $10 purchase price of each robe, plus $6 in allocated variable overhead costs, plus an allocated fixed overhead charge of $8. Customer response was such that when Lizzie's raised prices from $36 to $39 per robe, sales fell from 54 to 46 robes per week. a. Estimate the optimal (profit-maximizing) pricing strategy assuming a linear demand curve. b. Estimate the optimal pricing strategy assuming a pbwer demand curve. c. Explain why there is a difference between the above two strategies. d. Estimate the size of the profit at both prices, assuming a power d emand curve. e. Estimate the optimal price if the cost of buying the robes rises from $10 to S11, assuming a power demand curve.

Explanation / Answer

In this case as we can see the Power demand elasticity is positive if Cost of ruby increases from $10 to $11 then total cost would be $25 and now if firm still wants to earn 50% markup then firm will sell it to 37.5.

Now As per ed(Elasticity of Demand) Quatity should decrease accordingly to 50

Therfore Optimal Price will be MR=MC=25 and to earn 50% markup we get selling Price of 37.5

Hence the profit will be (37.5-25)*50 =12.5*50 =625

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