Seven years ago, you started a cross-town delivery service. You have two types of deliveryservices. You have a small parcel service for anything that is flat and measures less than 11x17. You have a package service using a 100 lb capacity bike trailer for anything weighting up to 10 lbs. Initially, you charged the same price for each service, but since the beginning of the Covid19 pandemic you have seen an increased in the demand for your package service. The demand for the package services seems to be more inelastic than the demand for parcels. You are now wondering if you should charge different prices for the parcel and package service or should you segment the market and charge two different prices? Complete the tables below and determine the best price strategy: price the services differently in each segment; or continue the one price policy? Combined Parcels & Packages Price        Parcels and Packages         TR            MR             TC             MC              MR-MC                    Profit 100                      50                                                            1600 90                      120                                                            2300 80                      190                                                            3000 70                      260                                                            3700 60                      330                                                            4400 50                      400                                                            5100 40                      470                                                            5800 30                      540                                                            6500 20                      610                                                            7200 10                      680                                                            7900

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Seven years ago, you started a cross-town delivery service. You have two types of deliveryservices. You have a small parcel service for anything that is flat and measures less than 11x17. You have a package service using a 100 lb capacity bike trailer for anything weighting up to 10
lbs. Initially, you charged the same price for each service, but since the beginning of the Covid19 pandemic you have seen an increased in the demand for your package service. The demand for the package services seems to be more inelastic than the demand for parcels. You are now wondering if you should charge different prices for the parcel and package service or should you segment the market and charge two different prices?

Complete the tables below and determine the best price strategy: price the services differently in each segment; or continue the one price policy?

Combined Parcels & Packages

Price        Parcels and Packages         TR            MR             TC             MC              MR-MC                    Profit
100                      50                                                            1600
90                      120                                                            2300
80                      190                                                            3000
70                      260                                                            3700
60                      330                                                            4400
50                      400                                                            5100
40                      470                                                            5800
30                      540                                                            6500
20                      610                                                            7200
10                      680                                                            7900

 

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