EBK PRINCIPLES OF MICROECONOMICS
11th Edition
ISBN: 8220100792908
Author: Fair
Publisher: YUZU
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Chapter 13, Problem 11P
To determine
Price and output decision in a
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You have just taken over the job of senior product manager for a line of Consumer Home Routers at Cisco. On your first day at work, your new boss walks into your office and informs you that your product line will be discontinued and replaced by a revolutionary new product line on October 1 of the same year. She also tells you that she wants you to raise prices on your existing product line by 20% in order to protect profitability during the transition. After a moment of reflection, you tell her that you need a day to gather some information and will respond to her at that time. You go to a number of sources including field sales VPs, market research, other product managers, and an external consulting firm, and ask them how responsive customers have been to changes in prices in the past. They tell you that a 10% increase in price always leads to a 5% decrease in sales volume. The next day you walk into your boss’s office.
What is your recommendation and what is your reasoning?
You are the manager of a midsized company that assembles personal computers. You purchase most components – such as random access memory (RAM) – in a competitive market. Based on your marketing research, consumers earning over $80,000 purchase 1.5 times more RAM than consumers with lower incomes. One morning, you pick up a copy of The Wall Street Journal and read an article indicating that input components for RAM are expected to rise in price, forcing manufacturers to produce RAM at a higher unit cost.Based on this information, what can you expect to happen to the price you pay for random access memory?The price _____ for random access memory.Would your answer change if, in addition to this change in RAM input prices, the article indicated that consumer incomes are expected to fall over the next two years as the economy dips into recession?
Maybe - price may ultimately increase or decrease.
Yes - price will now decrease.
Yes - price will now be unchanged.
No - price…
You are the manager of a midsized company that assembles personal computers. You purchase most components – such as random access memory (RAM) – in a competitive market. Based on your marketing research, consumers earning over RM80,000 purchase 1.5 times more RAM than consumers with lower incomes. One morning, you pick up a copy of The Wall Street Journal and read an article indicating that input components for RAM are expected to rise in price, forcing manufacturers to produce RAM at a higher unit cost. Based on curve, discuss the following scenarios.
Question 1: Based on this information, what can you expect to happen to the price you pay for random access memory (RAM)?
Question 2: In addition to this change in RAM input prices, the article indicated that consumer incomes are expected to fall over the next two years as the economy dips into recession?
Chapter 13 Solutions
EBK PRINCIPLES OF MICROECONOMICS
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