Assume you are the Director of Marketing for Majjus Enterprise, a firm that produces a new product called African Solar. Your company sells to two distinct geographical markets-East Legon and Nima. Majjus Enterprise is described as a monopolist and has the possibility of discriminating between its East Legon and Nima Markets. In order to derive the maximum profit from the production process, you engaged the services of an Econometrician, who estimated the demand functions for both East Legon and Nima markets to be: Q1 = 24 – 0.2P1 East Legon Market Q2 = 10 – 0.05P2 Nima Market Where Q1 and Q2 are the respective quantities of African Solar demanded in the East Legon and Nima markets and P1 and P2 are their respective prices (in GH¢). If the Total Cost (TC) of Majjus Enterprise for producing African Solar for these two markets is given as TC = 35 + 40Q, where Q = Q1 + Q2. What profit will Majjus Enterprise make with and without price discrimination? What business advice will you give in respect of practicing price discrimination or selling a uniform price?
Assume you are the Director of Marketing for Majjus Enterprise, a firm that produces a new product called African Solar. Your company sells to two distinct geographical markets-East Legon and Nima. Majjus Enterprise is described as a monopolist and has the possibility of discriminating between its East Legon and Nima Markets. In order to derive the maximum profit from the production process, you engaged the services of an Econometrician, who estimated the
Q1 = 24 – 0.2P1 East Legon Market
Q2 = 10 – 0.05P2 Nima Market
Where Q1 and Q2 are the respective quantities of African Solar demanded in the East Legon and Nima markets and P1 and P2 are their respective prices (in GH¢). If the Total Cost (TC) of Majjus Enterprise for producing African Solar for these two markets is given as TC = 35 + 40Q, where Q
= Q1 + Q2.
- What profit will Majjus Enterprise make with and without
price discrimination ?
- What business advice will you give in respect of practicing price discrimination or selling a uniform price?
- If price discrimination is the option to implement within the context of elasticity of demand, what pricing policy should be implemented in each market to raise total revenue?
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