You can now sell 120 cups of lemonade at 40 cents per cup, but demand is dropping at a rate of 6 cups per week each week. Assuming that raising the price doesn't affect the demand, how fast do you have to raise your price if you want to keep the revenue constant ?
A)6 cents per week
B) 2 cents per week
C) 1 cent per week
D) 4 cents per week
E) 5 cents per week

Question

You can now sell 120 cups of lemonade at 40 cents per cup, but demand is dropping at a rate of 6 cups per week each week. Assuming that raising the price doesn't affect the demand, how fast do you have to raise your price if you want to keep the revenue constant  ?
A)6 cents per week
B) 2 cents per week
C) 1 cent per week
D) 4 cents per week
E) 5 cents per week

Quizplus · Accepted Answer

To keep revenue constant, the decrease in the number of cups sold must be offset by an increase in price. Revenue is initially 120 cups * $0.40 = $48. If demand drops by 6 cups, you sell 114 cups. To maintain $48 revenue, the new price per cup should be $48/114 ≈ $0.4211, an increase of $0.0211 or approximately 2 cents per week.

You Can Now Sell 120 Cups of Lemonade at 40