You are starting your own Internet business. You decide to form a company that w

Question

You are starting your own Internet business. You decide to form a company that will sell cookbooks online. Justcookbooks.com is scheduled to launch 6 months from today. You estimate that the annual cost of this business will be as follows: Technology (Web design and maintenance) $5,000 Postage and handling $1,000 Miscellaneous $3,000 Inventory of cookbooks $2,000 Equipment $4,000 Overhead $1,000 1. What is the elasticity of the demand for cookbooks bought this way? 2. Is the business worth pursuing so far? 3. Why or why not? 4. Suppose that you expect to sell about 22,000 cookbooks per month online, and assume your overhead, technology, and equipment costs are fixed. What are your total costs? 5. What are your marginal costs?

Explanation / Answer

What is the elasticity of the demand for cookbooks bought this way?

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