Wholesalers: Use +/- buttons to alter the price per bag of coffee charged to the retailer then press Make Offer to post a price.
Retailers: After the wholesaler sets a price you know your cost per bag. Use your +/- to buttons to determine how much quantity to order from them at that price. Then, press the Place Order button.
For the retailer the market price for bags of coffee is determined by their quantity choice.
All: Once the wholesaler sets a price and the retailer chooses quantity both will receive their profit information.
Wholesalers: A wholesaler’s per bag profit is the price charged to a retailer minus the cost of production $r - $MC. Their total profit can be found by multiplying per bag profit by the total number of bags sold: Qx($r - $MC)
Retailers: A retailer’s per bag profit is the price charged to the customer minus the price paid to the wholesaler $P - $r. Their total profit can be found by multiplying per bag profit by the total number of bags sold: Qx($P - $r)
The inverse market demand for bags of coffee is given by P = 12 - Q. The marginal cost to the wholesaler for coffee production is MC=$4.
Wholesaler sets a price of r=$7. The retailer then chooses Q. Given a market demand curve of P = 12 - Q if the retailer chooses Q=4 that means the market price is P=$8.