Work out the PED for each, and comment on your result.
RCO Ltd is a UK based electronics manufacturer and retailer. Its main products are Netbook computers, PCs and Electronic Calculators. The current price of the Netbook is £500, the PC is £800 and the calculator is £40. This year the firm sold 10,000 Netbooks, 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:
Netbook: (-) 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.)
A local firm produces three types of Pizza, for delivery to
homes in the area. The owners have completed research, to discover
the demand curves for each of the three pizzas. The schedules are
shown below: (Quantities are per week) .
|Price||Pizza A (Qd)||Pizza B (Qd)||Pizza C (Qd)|
Plot the three demand curves, on one graph.
Calculate PED for all three pizzas over the price range £9 to £10.
For Pizza C only, what price must be charged if the firm wishes to maximize its sales revenue?