A state park is selling firewood at $5/bundle and juice at $4/bottle. Firewood costs the park $4/bundle and juice costs $2/bottle. The elasticities of demand for firewood and juice are 1.2 and 1.8. In what direction could the park change prices to increase profit while leaving consumer surplus unchanged? Briefly explain. (Hint: Use Ramsey pricing)

A state park is selling firewood at $5/bundle and juice at $4/bottle. Firewood costs the park $4/bundle and juice costs $2/bottle. The elasticities of demand for firewood and juice are 1.2 and 1.8. In what direction could the park change prices to increase profit while leaving consumer surplus unchanged? Briefly explain. (Hint: Use Ramsey pricing)

Economics (MindTap Course List)

13th Edition

ISBN:9781337617383

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter5: Supply, Demand, And Price: Applications

Section5.2: Application 2: Subsidizing The Consumption Of Anything Can Raise Its Price

Problem 2ST

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