Suppose the outputs of beauty shops and pet-grooming salons are complementary, providing one-stop shopping for personal and pet maintenance. Betty Beehive is thinking about moving her beauty shop from an isolated location to a vacant building next to Peter’s pet grooming shop.In making her decision, she makes the following assumptions:If Betty moves, she will keep all her current customers (20 people per week) and attract 25% of Peter’s current customers.Peter currently has 60 customers per week. 3. Excluding rent, Betty’s profit per beauty treatment is $10. 4.The weekly rent at the new location is $200 higher than Betty’s current rent.Question = If Betty moves her beauty shop, will her profits increase or decrease? By how much?Question =Suppose that if Betty makes the move, 50 percent of her original customerswill switch from George’s grooming salon to Peter’s. If Peter’s profit pertreatment is $8, how much would he be willing to pay Betty to make themove? Will the payment be enough to induce Betty to make the move? Explain your answer.

Total Profit = Total Revenue - Total Expenses Willingness to pay is the maximum amount that a person…

Answered: Suppose the outputs of beauty shops and…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Suppose the outputs of beauty shops and pet-grooming salons are complementary, providing one-stop shopping for personal and pet maintenance. Betty Beehive is thinking about moving her beauty shop from an isolated location to a vacant building next to Peter’s pet grooming shop.In making her decision, she makes the following assumptions:

If Betty moves, she will keep all her current customers (20 people per week) and attract 25% of Peter’s current customers.
Peter currently has 60 customers per week.

3. Excluding rent, Betty’s profit per beauty treatment is $10.

4.The weekly rent at the new location is $200 higher than Betty’s current rent.

Question = If Betty moves her beauty shop, will her profits increase or decrease? By how much?
Question =Suppose that if Betty makes the move, 50 percent of her original customerswill switch from George’s grooming salon to Peter’s. If Peter’s profit pertreatment is $8, how much would he be willing to pay Betty to make themove? Will the payment be enough to induce Betty to make the move? Explain your answer.

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