Company A sells 100,000 bicycles each year at RM250 per bicycle. From past experience, the manager of Company ABC believes the price elasticity of the company’s bicycles is approximately - 0.8. The manager is thinking of increasing the bicycle’s prices to RM300 per bicycle, an increase of 20%. Question 1: Calculate the anticipated % change in the company’s sales volume. Question 2:Calculate the new total revenue. Question 3: Should the manager of company ABC change his pricing strategy? Justify your answer
Company A sells 100,000 bicycles each year at RM250 per bicycle. From past experience, the manager of Company ABC believes the price elasticity of the company’s bicycles is approximately - 0.8. The manager is thinking of increasing the bicycle’s prices to RM300 per bicycle, an increase of 20%. Question 1: Calculate the anticipated % change in the company’s sales volume. Question 2:Calculate the new total revenue. Question 3: Should the manager of company ABC change his pricing strategy? Justify your answer
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Chapter14: Pricing Techniques And Analysis
Section: Chapter Questions
Problem 1E
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Question
Company A sells 100,000 bicycles each year at RM250 per bicycle. From past experience, the manager of Company ABC believes the price elasticity of the company’s bicycles is approximately - 0.8. The manager is thinking of increasing the bicycle’s prices to RM300 per bicycle, an increase of 20%.
Question 1: Calculate the anticipated % change in the company’s sales volume.
Question 2:Calculate the new total revenue.
Question 3: Should the manager of company ABC change his pricing strategy? Justify your answer
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