(Answered) Suppose you are the owner of a hair salon and your current

Engineering

Suppose you are the owner of a hair salon and your current fixed costs total $25,000 (land, interest on a bank loan, utilities). In addition, your current unit variable cost for a haircut is $15 (which includes labor and haircut supplies).

1. Assume you apply a 40 percent markup on unit costs of each visit. How much do you charge customers for a haircut?

2. Calculate the price necessary to break-even by giving hair cut to 1,000 customers.

3. Assume you offer 20% promotion to the price set in Q.2 and you get 200 more customers.

A) How much will you charge each haircut after you apply the promotion?

B) What is the price elasticity of demand for this price decrease? Hint. Use point PED formula.

C) Is demand elastic or inelastic? why? D) What is midpoint PED for this price/demand change

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