Refer to information in table 1. A cell phone company wants to devise pricing based on potential buyers' differences in preferences. Differences in preferences are shown by the group elasticities in column 2. Marginal cost (MC) of cell phone is $200. Working adults High income households Senior citizens Students S S S Table 1: cell phone elasticities by consumer groups and marginal costs Consumer groups Price MC S Working adults High income households Senior citizens Students If the base (undiscounted) price of the cell phone is $1000, based on the information in table 1 calculate the cell phone price for each group using mark-up pricing rule. Consumer groups Price Price elasticity of demand -1.25 -1.35 1,001.0 1000.0 400.7 771 -1.7 -2 $200 $200 $200 $200

Refer to information in table 1. A cell phone company wants to devise pricing based on potential buyers' differences in preferences. Differences in preferences are shown by the group elasticities in column 2. Marginal cost (MC) of cell phone is $200. Working adults High income households Senior citizens Students S S S Table 1: cell phone elasticities by consumer groups and marginal costs Consumer groups Price MC S Working adults High income households Senior citizens Students If the base (undiscounted) price of the cell phone is $1000, based on the information in table 1 calculate the cell phone price for each group using mark-up pricing rule. Consumer groups Price Price elasticity of demand -1.25 -1.35 1,001.0 1000.0 400.7 771 -1.7 -2 $200 $200 $200 $200

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Step by step answers
Each scenario gives some information about price elasticity of demand. For each, calculate the missing data, and determine if the price change under consideration will increase, decrease, or not change the firm's total revenue. Honest Abe's Used Cars estimates the price elasticity of demand for their cars to be -4.1. Last month, Abe tried a new marketing scheme which decreased the number of cars sold by 87%. Abe must have his prices by -27.87 Abe's total revenue by increased and total revenue to increased. At Webs-R-Us, a website design company, the new manager has decided to increase the price of Webs-R-Us services by 15%. She estimates that Webs-R-Us has a price elasticity of demand at -0.30. The manager expects the number of websites designed to decrease increase. %. e %
Table 1: cell phone elasticities by consumer groups and marginal costs Consumer groups Price elasticity of MC Price demand -1.25 -1.35 Working adults High income households Senior citizens Students -1.7 -2 $200 $200 $200 $200