RCO Manufacturing is an electronics manufacturer and retailer. Its main products are ultrabook computers, PCs and calculators. The current price of the ultrabook is £500, the PC is £800 and the calculator is £40. This year the firm sold 10,000 ultrabooks, 20,000 PCs and 1 million calculators. In an attempt to improve revenue the managers of the firm have decided to increase all prices by 10%. Market research has suggested that the price elasticity of demand for each product is: Ultrabook: (-) 1.5; PC : (-) 2.5; calculator: (-) 0.6 You have been asked to evaluate the planned price increases. Comment on the planned price changes. Would a 10% price reduction have been better for some or all of the products? What benefit (if any) would advertising bring to the firm? (You should support any arguments with calculations.)

RCO Manufacturing is an electronics manufacturer and retailer. Its main products are ultrabook computers, PCs and calculators. The current price of the ultrabook is £500, the PC is £800 and the calculator is £40. This year the firm sold 10,000 ultrabooks, 20,000 PCs and 1 million calculators. In an attempt to improve revenue the managers of the firm have decided to increase all prices by 10%. Market research has suggested that the price elasticity of demand for each product is: Ultrabook: (-) 1.5; PC : (-) 2.5; calculator: (-) 0.6 You have been asked to evaluate the planned price increases. Comment on the planned price changes. Would a 10% price reduction have been better for some or all of the products? What benefit (if any) would advertising bring to the firm? (You should support any arguments with calculations.)

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

ChapterB: Differential Calculus Techniques In Management

Section: Chapter Questions

Problem 3E

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