3. individual problems 9-3 suppose that a new entry has decreased your demand elasticity from –2 to –3 (made demand more elastic) and that your price, before the new entry, was $20. you should adjust your price to $ due to the new entry and decreased demand elastici

The marginal cost, or price of producing more, is the variation in total cost that results from increasing the quantity produced in economics.
Say, for illustration, that it costs $100 to produce 100 vehicle tires. It would cost $80 to produce one more tire. The cost to produce one extra unit of a good or service is then known as the marginal cost.
Because a corporation seeking to maximize profits will only create until marginal cost (MC) equals marginal income, marginal cost is a key concept in economic theory (MR). Beyond that, the cost of manufacturing a new item will be more than the profit made.

Individual problems 9-3 suppose that a new entry has decreased your demand elasticity from –2 to –3 (made demand more elastic) and that your price, before the new entry, was $20. you should adjust your price to $ due to the new entry and decreased demand elastic.

First, we'll have to find out the marginal cost, and for that, we'll use the formula, (P-MC)/P = 1/|Ed|

Here, P= $30 and |Ed|= 2

Therefore, using the formula,

(30-MC)/30= 1/2

Or, 60-2MC = 30

Or, MC= 30/2=15

Now we'll use this same formula with this calculated MC, new elasticity to find the new price.

Therefore, (P-15)/P = 1/3

Or, 3P-45 = P

Or, 2P = 45

Or, P=45/2=22.5

Answer- you'll have to decrease the price to $22.5 due to the new entry.

To learn more about marginal cost, refer to:

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