Coffee Mug Market Analysis

What are the price elasticities of demand for Lion mugs and Zebra mugs?

Based on the data given, calculate the price elasticities of demand for both types of coffee mugs.

Price Elasticity of Demand for Lion Mugs

PED of Lion Mugs = (% Change in Quantity Demanded)/(% Change in Price)

Price elasticity of demand (PED) is a measure used in economics to demonstrate the responsiveness of demand to changes in the price of a particular product. It is calculated by dividing the percentage change in the quantity demanded by the percentage change in the price.

Here, Georgia Tech is producing two types of coffee mugs, Lion mugs, and Zebra mugs. The marginal cost of each mug is $10, and they are the only supplier of these products, making them a monopolist. The demand for a product is elastic when a small change in price results in a significant change in the quantity demanded. A demand is inelastic when a large change in price results in a small change in the quantity demanded.

For Lion Mugs,

Price of Lion mugs = $20

Marginal cost = $10