Question

Your younger sister needs $50 to buy a new bike. she has opened a lemonade stand to make the money she needs. your mother is paying for all of the ingredients. she currently is charging 25 cents per cup, but she wants to adjust her price to earn the $50 faster. if you know that the demand for lemonade is elastic, what is your advice to her?

Answer 1

Elastic demand means that consumers are sensitive to price and that increased prices can lead to lower sales. There isn't enough information to fully answer this question. We don't know how elastic the demand is. If the demand is only slightly elastic, the increased price and lower demand could still equal higher profits.