Quiz 14: Pricing Techniques and Analysis
Price elasticity of demand in U.S. is estimated to be and price elasticity of demand is overseas markets. Overseas market is more elastic as comparison to the domestic market. Marginal cost is $40. Following is the condition for equilibrium: Elasticity of demand in overseas market is . Marginal cost is $15 in overseas market. Following is the equilibrium price in the overseas market: It has been proved that highly elastic demand reduces the price of output. Domestic price is higher in comparison to overseas for high elasticity of demand in overseas market.
Price elasticity of demand for first class Price elasticity of demand for unrestricted coach Price elasticity of demand for restricted discount coach Following is the condition for equilibrium: Calculate the values of prices by equating the marginal revenue function with the marginal cost:
a) Total Profit function Demand function for two classes of goods Total Revenue for manufactured item Total Revenue for semi-manufactured item Total Cost function Total Profit Function b) Profit maximizing price and output Differentiating the total profit function with respect to the :- Differentiating the total profit function with respect to the :- Substituting the value of output in inverse demand function c) Marginal Revenue in each market Substituting the values of output Marginal Cost for manufactured good is Substituting the values of output Marginal Cost for semi-manufactured good is d) Profit if different prices are charged in markets Total Profit Function e) Profit if same price is charged Price of both manufacture and semi-manufactured items should be equal. Or Total Profit Function Differentiating it with respect to Equation the marginal profit with zero Substituting the value of Following is the price of manufactured item:- Profit at equalized price f) Difference in profit level between differential pricing and uniform pricing Elasticity of demand manufactured good Differentiating with respect to the price Elasticity of demand manufactured good Differentiating with respect to the price
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