Problem A-4 The Economists' Approach to Pricing [LOA-1] The postal service of St. Vincent, an island in the West Indies, obtains a significant portion of its revenues from sales of special souvenir sheets to stamp collectors. The souvenir sheets usually contain several high-value St. Vincent stamps depicting a common theme, such as the life of Princess Diana. The souvenir sheets are designed and printed for the postal service by Imperial Printing, a stamp agency service company in the United Kingdom. The souvenir sheets cost he postal service $1.70 each. St. Vincent has been selling these souvenir sheets for $9.00 each and ordinarily sells about 50,000 units. To test the market, the postal service recently priced a new souvenir sheet at $10.00 and sales dropped to 40,000 units. Required: la. Calculate the contribution margin for sale price of $9.00 each $10.00 each? $9.00 Price $10.00 Price Unit sales Sales Cost of goods sold Contribution margin Ib.Does the postal service of St. Vincent make more money selling souvenir sheets for $9.00 each or $10.00 each? O $9.00 O $10.00 2. Estimate the price elasticity of demand for the souvenir sheets. (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 4 decimal places.) Price elasticity of demand 3. Estimate the profit-maximizing price for souvenir sheets. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Profit-maximizing price
Problem A-4 The Economists' Approach to Pricing [LOA-1] The postal service of St. Vincent, an island in the West Indies, obtains a significant portion of its revenues from sales of special souvenir sheets to stamp collectors. The souvenir sheets usually contain several high-value St. Vincent stamps depicting a common theme, such as the life of Princess Diana. The souvenir sheets are designed and printed for the postal service by Imperial Printing, a stamp agency service company in the United Kingdom. The souvenir sheets cost he postal service $1.70 each. St. Vincent has been selling these souvenir sheets for $9.00 each and ordinarily sells about 50,000 units. To test the market, the postal service recently priced a new souvenir sheet at $10.00 and sales dropped to 40,000 units. Required: la. Calculate the contribution margin for sale price of $9.00 each $10.00 each? $9.00 Price $10.00 Price Unit sales Sales Cost of goods sold Contribution margin Ib.Does the postal service of St. Vincent make more money selling souvenir sheets for $9.00 each or $10.00 each? O $9.00 O $10.00 2. Estimate the price elasticity of demand for the souvenir sheets. (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 4 decimal places.) Price elasticity of demand 3. Estimate the profit-maximizing price for souvenir sheets. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Profit-maximizing price
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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![Problem A-4 The Economists' Approach to Pricing [LOA-1]
The postal service of St. Vincent, an island in the West Indies, obtains a significant portion of its revenues from sales of special souvenir sheets to stamp collectors. The souvenir sheets usually contain several high-value St. Vincent stamps
depicting a common theme, such as the life of Princess Diana. The souvenir sheets are designed and printed for the postal service by Imperial Printing, a stamp agency service company in the United Kingdom. The souvenir sheets cost
the postal service $1.70 each. St. Vincent has been selling these souvenir sheets for $9.00 each and ordinarily sells about 50,000 units. To test the market, the postal service recently priced a new souvenir sheet at $10.00 and sales
dropped to 40,000 units.
Required:
1a. Calculate the contribution margin for sale price of $9.00 each or $10.00 each?
$9.00 Price
$10.00 Price
Unit sales
Sales
Cost of goods sold
Contribution margin
1b.Does the postal service of St. Vincent make more money selling souvenir sheets for $9.00 each or $10.00 each?
O $9.00
O $10.00
2. Estimate the price elasticity of demand for the souvenir sheets. (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 4 decimal places.)
Price elasticity of demand
3. Estimate the profit-maximizing price for souvenir sheets. (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Profit-maximizing price](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Ff8151a55-1f97-4293-9574-706e6f6ba5ac%2Fdca4fe34-1f44-4017-8a67-17ddcdede600%2Fnhd49lk_processed.png&w=3840&q=75)
Transcribed Image Text:Problem A-4 The Economists' Approach to Pricing [LOA-1]
The postal service of St. Vincent, an island in the West Indies, obtains a significant portion of its revenues from sales of special souvenir sheets to stamp collectors. The souvenir sheets usually contain several high-value St. Vincent stamps
depicting a common theme, such as the life of Princess Diana. The souvenir sheets are designed and printed for the postal service by Imperial Printing, a stamp agency service company in the United Kingdom. The souvenir sheets cost
the postal service $1.70 each. St. Vincent has been selling these souvenir sheets for $9.00 each and ordinarily sells about 50,000 units. To test the market, the postal service recently priced a new souvenir sheet at $10.00 and sales
dropped to 40,000 units.
Required:
1a. Calculate the contribution margin for sale price of $9.00 each or $10.00 each?
$9.00 Price
$10.00 Price
Unit sales
Sales
Cost of goods sold
Contribution margin
1b.Does the postal service of St. Vincent make more money selling souvenir sheets for $9.00 each or $10.00 each?
O $9.00
O $10.00
2. Estimate the price elasticity of demand for the souvenir sheets. (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 4 decimal places.)
Price elasticity of demand
3. Estimate the profit-maximizing price for souvenir sheets. (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Profit-maximizing price
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