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Q1) Bookshelf.com, the online bookseller, wants to increase its total revenue. One strategy is to offer a 10% discount on every book it sells. Bookshelf.com knows that its customers can be divided into two distinct groups according to their likely responses to the discount. The accompanying table shows how the two groups respond to the discount. Group A (sales per week) Volume of sales before the 3.1 million 20% discount Volume of sales after the 3.3 million 20% discount Group B (sales per week) 3.0 million 3.4 million a. Calculate the price elasticities of demand for group A and group B. b. Explain how the discount will affect total revenue from each group. c. Suppose Bookshelf.com knows which group each customer belongs to when he logs on and can choose whether or not to offer the 10% discount. If Bookshelf.com wants to increase its total revenue, should discounts be offered to group A or to group B, to neither group, or to both groups?

Q1) Bookshelf.com, the online bookseller, wants to increase its total revenue. One strategy is to offer a 10% discount on every book it sells. Bookshelf.com knows that its customers can be divided into two distinct groups according to their likely responses to the discount. The accompanying table shows how the two groups respond to the discount. Group A (sales per week) Volume of sales before the 3.1 million 20% discount Volume of sales after the 3.3 million 20% discount Group B (sales per week) 3.0 million 3.4 million a. Calculate the price elasticities of demand for group A and group B. b. Explain how the discount will affect total revenue from each group. c. Suppose Bookshelf.com knows which group each customer belongs to when he logs on and can choose whether or not to offer the 10% discount. If Bookshelf.com wants to increase its total revenue, should discounts be offered to group A or to group B, to neither group, or to both groups?

Microeconomics: Private and Public Choice (MindTap Course List)
Microeconomics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN:9781305506893
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Chapter7: Consumer Choice And Elasticity
Section: Chapter Questions
Problem 13CQ: Suppose Erin, the owner-manager of a local hotel projects the following demand for her rooms: a....
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Q1) Bookshelf.com, the online bookseller, wants to increase its total revenue. One strategy is to offer a 10% discount on every book it sells. Bookshelf.com knows that its customers can be divided into two distinct groups according to their likely responses to the discount. The accompanying table shows how the two groups respond to the discount. Volume of sales before the 20% discount Group A (sales per week) 3.1 million Volume of sales after the 3.3 million 20% discount Group B (sales per week) 3.0 million 3.4 million a. Calculate the price elasticities of demand for group A and group B. b. Explain how the discount will affect total revenue from each group. c. Suppose Bookshelf.com knows which group each customer belongs to when he logs on and can choose whether or not to offer the 10% discount. If Bookshelf.com wants to increase its total revenue, should discounts be offered to group A or to group B, to neither group, or to both groups?
Transcribed Image Text:Q1) Bookshelf.com, the online bookseller, wants to increase its total revenue. One strategy is to offer a 10% discount on every book it sells. Bookshelf.com knows that its customers can be divided into two distinct groups according to their likely responses to the discount. The accompanying table shows how the two groups respond to the discount. Volume of sales before the 20% discount Group A (sales per week) 3.1 million Volume of sales after the 3.3 million 20% discount Group B (sales per week) 3.0 million 3.4 million a. Calculate the price elasticities of demand for group A and group B. b. Explain how the discount will affect total revenue from each group. c. Suppose Bookshelf.com knows which group each customer belongs to when he logs on and can choose whether or not to offer the 10% discount. If Bookshelf.com wants to increase its total revenue, should discounts be offered to group A or to group B, to neither group, or to both groups?
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