You own "Shake and Bake," a dessert food truck making cupcakes and milkshakes. The marginal cost of your milkshakes are constant, with MC=4. You are currently charging your customers $6 per shake. You just took an advanced series in econometrics and have estimated the demand function for milkshakes in your community, finding that the own price elasticity of demand is approximately -2.0. Based upon what you have learned in managerial economics class, should you increase or decrease your price for shakes to increase your profits? the answer is NOT to decrease price!!
