Quiz 14: Pricing Techniques and Analysis

Business

Price elasticity of demand in U.S. is estimated to be img and price elasticity of demand is img overseas markets. Overseas market is more elastic as comparison to the domestic market. Marginal cost is $40. Following is the condition for equilibrium: img img Elasticity of demand in overseas market is img . Marginal cost is $15 in overseas market. Following is the equilibrium price in the overseas market: img img 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 img Price elasticity of demand for unrestricted coach img Price elasticity of demand for restricted discount coach img Following is the condition for equilibrium: img img img Calculate the values of prices by equating the marginal revenue function with the marginal cost: img img img

a) Total Profit function Demand function for two classes of goods img Total Revenue for manufactured item img Total Revenue for semi-manufactured item img img Total Cost function img Total Profit Function img img b) Profit maximizing price and output Differentiating the total profit function with respect to the img :- img img img Differentiating the total profit function with respect to the img :- img Substituting the value of output in inverse demand function img c) Marginal Revenue in each market img img Substituting the values of output img Marginal Cost for manufactured good is img img img Substituting the values of output img Marginal Cost for semi-manufactured good is img d) Profit if different prices are charged in markets Total Profit Function img img img e) Profit if same price is charged Price of both manufacture and semi-manufactured items should be equal. Or img img img img Total Profit Function img img Differentiating it with respect to img img Equation the marginal profit with zero img Substituting the value of img img img Following is the price of manufactured item:- img Profit at equalized price img f) Difference in profit level between differential pricing and uniform pricing Elasticity of demand manufactured good img img img Differentiating with respect to the price img img Elasticity of demand manufactured good img img img Differentiating with respect to the price img img

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