P

you may recall from that example, the catalog retailer pays a wholesale price of $25 per pair for Birkenstock sandals, markets them at a regular catalog price of $75 per pair, and the arc price elasticity of demand EP = -1.5 is the best available estimate of the current point price elasticity of demand. This typical $50 profit margin implies a standard markup on price of 66.7 percent because ati n • Price - Cost

Price

If it can again be assumed that the arc price elasticity of demand EP = -1.5 is the best available estimate of the current point price elasticity of demand, the $75 regular catalog price reflects an optimal markup on price because

Optimal Markup _ -1 on Price ep

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