1) When chef Paolo prices his speciality ‘pizza-n-all’ meal at £25, he sells 20 meals a day. When he prices his pizza meal at £22, he sells 21 meals a day. Suppose Paolo reduces his price from £25 to £22. Explain the impact of the price reduction on the revenue he receives from the first 20 meals he sells. Total Revenue – Price X Quantity. Revenue @ £25 = £25 X 20 = £500. Revenue @ £22 = £25 X 20 = £440 The impact of the price reduction is a reduction in total revenue of £60 (-12%) over the first 20 meals that he sells. Calculate the additional revenue generated from the additional meals he sells when he lowers his price to £22. Total Revenue = Price X Quantity. Total Revenue @ £22 = £22 X 21 = £462. Additional Revenue = Revenue @ £25 – revenue @ £22 = £500 - £462 = -£38. Calculate the marginal revenue Paolo receives from the 21st meal. How does that amount relate to the amounts you calculated in (a) and (b)? (3%) Suppose Paolo reduces his price from £25 to £22. Explain the impact of the price reduction on the revenue he receives from the first 20 meals he sells.Is Paolo’s decision to reduce his price from £25 to £22 a good one? Why or why not? (1) When chef Paolo prices his speciality ‘pizza-n-all’ meal at £25, he sells 20 meals a day. When he prices his pizza meal at £22, he sells 21 meals a day. Calculate the additional revenue generated from the additional meals he sells when he lowers his price to £22. Calculate the marginal revenue Paolo receives from the 21st meal. How does that amount relate to the amounts you calculated in (a) and (b)? Is Paolo’s decision to reduce his price from £25 to £22 a good one? Why or why not?

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter2: Introduction To Spreadsheet Modeling

Section: Chapter Questions

Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...

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(1) When chef Paolo prices his speciality ‘pizza-n-all’ meal at £25, he sells 20 meals a day.

When he prices his pizza meal at £22, he sells 21 meals a day.

Suppose Paolo reduces his price from £25 to £22. Explain the impact of the price reduction on the revenue he receives from the first 20 meals he sells.

Total Revenue – Price X Quantity.

Revenue @ £25 = £25 X 20 = £500.

Revenue @ £22 = £25 X 20 = £440

The impact of the price reduction is a reduction in total revenue of £60 (-12%) over the first 20 meals that he sells.

Calculate the additional revenue generated from the additional meals he sells when he lowers his price to £22.

Total Revenue = Price X Quantity.

Total Revenue @ £22 = £22 X 21 = £462.

Additional Revenue = Revenue @ £25 – revenue @ £22 = £500 - £462 = -£38.

Calculate the marginal revenue Paolo receives from the 21st meal. How does that amount relate to the amounts you calculated in (a) and (b)? (3%)

1. Suppose Paolo reduces his price from £25 to £22. Explain the impact of the price reduction on the revenue he receives from the first 20 meals he sells.Is Paolo’s decision to reduce his price from £25 to £22 a good one? Why or why not?
  (1) When chef Paolo prices his speciality ‘pizza-n-all’ meal at £25, he sells 20 meals a day.
  
  When he prices his pizza meal at £22, he sells 21 meals a day.
  
  Calculate the additional revenue generated from the additional meals he sells when he lowers his price to £22.
1. Calculate the marginal revenue Paolo receives from the 21st meal. How does that amount relate to the amounts you calculated in (a) and (b)?
1. Is Paolo’s decision to reduce his price from £25 to £22 a good one? Why or why not?

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