Posted by **Anonymous** on Tuesday, February 7, 2012 at 1:20pm.

The demand curve for haircuts at Terry’s Hair Design is P=20-0.20Q

Where Q is the number of cuts per week and P is the price of a haircut. Terry is considering raising her price above the current price of $15.00. Terry is unwilling to raise price if the price hike will cause revenues to fall.

a. Should Terry raise the price of haircuts above$15.00? Why or why not?

b. Suppose demand for Terry’s haircuts increases to P=40 – 0.40Q. At a price of 15, should Terry raise the price of her haircuts? Why or why not?

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