You provide your services primarily to educational providers, helping them understand how much to charge for their schooling. Imagine that there two types of consumer – high revenue (H) and low revenue (L). Assume demand is given by PL = 1,000–QL/10 and PH = 2,500 – 2QH. In both equations, quantity is in hours of consulting provided. The marginal and average total cost of providing an hour of consulting is $50 per hour. a. Suppose you cannot see who is an H and who is a L, and you can only charge one price. What price do you charge, and how many units do you sell? b. Now imagine you can charge different prices for different quantities, e.g., quantity discounts. Propose a pricing “schedule” (that is, what prices you would offer under what quantity rules) that will allow you to earn greater profit than you would in part a. State how many hours of consulting are sold to each type of consumer.
You provide your services primarily to educational providers, helping them understand how much to charge for their schooling. Imagine that there two types of consumer – high revenue (H) and low revenue (L). Assume demand is given by PL = 1,000–QL/10 and PH = 2,500 – 2QH.
In both equations, quantity is in hours of consulting provided. The marginal and
a. Suppose you cannot see who is an H and who is a L, and you can only charge one price. What price do you charge, and how many units do you sell?
b. Now imagine you can charge different prices for different quantities, e.g., quantity discounts. Propose a pricing “schedule” (that is, what prices you would offer under what quantity rules) that will allow you to earn greater profit than you would in part a. State how many hours of consulting are sold to each type of consumer.
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