Refer to information in table 1. A cell phone company wants to devise pricing based on potential buyers' differences in preferences. Differences in preferences are shown by the group elasticities in column 2. Marginal cost (MC) of cell phone is $200. Working adults High income households Senior citizens Students S S S Table 1: cell phone elasticities by consumer groups and marginal costs Consumer groups Price MC S Working adults High income households Senior citizens Students If the base (undiscounted) price of the cell phone is $1000, based on the information in table 1 calculate the cell phone price for each group using mark-up pricing rule. Consumer groups Price Price elasticity of demand -1.25 -1.35 1,001.0 1000.0 400.7 771 -1.7 -2 $200 $200 $200 $200

Refer to information in table 1. A cell phone company wants to devise pricing based on potential buyers' differences in preferences. Differences in preferences are shown by the group elasticities in column 2. Marginal cost (MC) of cell phone is $200. Working adults High income households Senior citizens Students S S S Table 1: cell phone elasticities by consumer groups and marginal costs Consumer groups Price MC S Working adults High income households Senior citizens Students If the base (undiscounted) price of the cell phone is $1000, based on the information in table 1 calculate the cell phone price for each group using mark-up pricing rule. Consumer groups Price Price elasticity of demand -1.25 -1.35 1,001.0 1000.0 400.7 771 -1.7 -2 $200 $200 $200 $200

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter14: Indirect Price Discrimination

Section: Chapter Questions

Problem 7MC

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