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The demand curve for haircuts at Terry Bernard's Hair Design is:
P=20-0.20Q
Where Q is the number of cuts per week and P is the price of a hair cut. Terry is considering raising her price above the current price of $15. 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? 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?
Please explain how?
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