Rama wants to start a Cafe in her garage. Her monthly expenditure on salaries will be ₹ 10,000 & that on ingredients and utilities will be around ₹23,000. Her garage is currently earning her a rent of ₹ 60,000 per annum. Also she would have to give up her current job where she is earning a monthly salary of ₹ 47,000. She is expecting the monthly sales to be around a ₹ 75,000 per month. A. Calculate Rama’s explicit cost, implicit cost and economic profit. Should she start the Cafe? B. If Rama is the only cafe in her locality with no other competition, which part of the demand curve would she be operating on: elastic or inelastic portion? explain your answer?

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