Markup on Price. TLC Tree Service, Inc., provides tree spraying services to residential customers in the Detroit area. The company recently raised its service price from $50 to $60 per tree. As a result, sales fell to 3,900 from 4,900 units in the prior year.
A. Calculate the arc price elasticity of demand for TLC service.
B. Assume that the arc price elasticity (from Part A) is the best available estimate of the point price elasticity of demand. If marginal cost is $12 per unit for labor and materials, calculate TLC's optimal markup on price and its optimal price.

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The Answer of Markup on Price. TLC Tree Service, Inc., provides tree spraying services to residential customers in the Detroit area. The company recently raised its service price from $50 to $60 per tree. As a result, sales fell to 3,900 from 4,900 units in the prior year.
A. Calculate the arc price elasticity of demand for TLC service.
B. Assume that the arc price elasticity (from Part A) is the best available estimate of the point price elasticity of demand. If marginal cost is $12 per unit for labor and materials, calculate TLC's optimal markup on price and its optimal price.