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 $0.70 each. St. Vincent has been selling these souvenir sheets for $7.00 each and ordinarily sells about 52,000 units. To test the market, the postal service recently priced a new souvenir sheet at $8.00 and sales dropped to 42,000 units. Required: 1a. Calculate the contribution margin for sale price of $7.00 each or $8.00 each? $7.00 Price $8.00 Price Unit sales 52,000 42,000 364,000 $ 336,000 wwww 29,400 ............ 306,600 Sales Cost of goods sold Contribution margin 36,400 327,600 $ 1b.Does the postal service of St. Vincent make more money selling souvenir sheets for $7.00 each or $8.00 each? O $7.00 O $8.00 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.)
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 $0.70 each. St. Vincent has been selling these souvenir sheets for $7.00 each and ordinarily sells about 52,000 units. To test the market, the postal service recently priced a new souvenir sheet at $8.00 and sales dropped to 42,000 units. Required: 1a. Calculate the contribution margin for sale price of $7.00 each or $8.00 each? $7.00 Price $8.00 Price Unit sales 52,000 42,000 364,000 $ 336,000 wwww 29,400 ............ 306,600 Sales Cost of goods sold Contribution margin 36,400 327,600 $ 1b.Does the postal service of St. Vincent make more money selling souvenir sheets for $7.00 each or $8.00 each? O $7.00 O $8.00 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.)
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text: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 $0.70 each. St. Vincent has been selling these souvenir sheets for $7.00 each and ordinarily sells about 52,000 units. To test the
market, the postal service recently priced a new souvenir sheet at $8.00 and sales dropped to 42,000 units.
Required:
1a. Calculate the contribution margin for sale price of $7.00 each or $8.00 each?
$7.00 Price
$8.00 Price
Unit sales
52,000
42,000
Sales
$
364,000 $
336,000
Cost of goods sold
36,400
29,400
Contribution margin
$
327,600
$
306,600
1b.Does the postal service of St. Vincent make more money selling souvenir sheets for $7.00 each or $8.00 each?
O $7.00
O $8.00
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
This is a numeric cell, so please
enter numbers only.
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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