EBK INTERMEDIATE MICROECONOMICS AND ITS
EBK INTERMEDIATE MICROECONOMICS AND ITS
12th Edition
ISBN: 9781305176386
Author: Snyder
Publisher: YUZU
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Chapter 17, Problem 3RQ
To determine

To describe: The reason that the giving pricing method might appear puzzling for economists. The type of cognitive limitation that the stores are trying to exploit isalso to be evaluated.

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The term "BOGO" ("Buy One Get One", also referred to as "Buy One Get One Free") has entered the urban dictionary, and is a sales tactic whereby sellers offer buyers a second unit of the item free if they pay full price for the first unit. A variation of BOGO occurs when stores offer a "Buy One Get One Half Off" sales promotion. Why do you think consumers respond to the "Buy One Get One Half Off" sales promotion and what principle of economics does this behavior reflect?
A manufacturer of microwaves has discovered that male shoppers have little value for microwaves and attribute almost no extra value to an auto-defrost feature. Female shoppers generally value microwaves more than men and attribute greater value to the auto-defrost feature. There is little additional cost to incorporating an autodefrost feature. Since men and women cannot be charged different prices for the same product, the manufacturer is considering introducing two different models. The manufacturer has determined that men value a simple microwave at $70 and one with auto-defrost at $80 while women value a simple microwave at $80 and one with autodefrost at $150. If there is an equal number of men and women, what pricing strategy will yield the greatest revenue? What if women comprise the bulk of microwave shoppers?
Suppose that each person's demand for a project can be expressed as P = 100 - 20Q. Suppose that the firm wants to use two-part pricing. If the firm charges a price of $40 per unit, what is the maximum that the firm can charge in the fixed fee F?
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