Burton Inc.

Business

www.ibbusinessandmanagement.com

THE AMAZING MARKET DAY CHALLENGE!

Activity E Price and Costs

Activity E

In groups, use the following market research information to answer the questions that follow: The market research conducted by Top 10, a QMC Year 10 Enterprise Company has found the following: Product Price Junior school demand $2 A B C D E $2 $3 $3 $2 $3 $3 $5 Middle school demand $2 $3 $5 0% Seniors/teachers Cost to demand make $2 $3 $5 $0.75 $1.75 $1.05 $2.10 $0.25 $232.50 $236.25 $150 $481.25 $160 Profit

50% 30% 10% 50% 30%

30% 25% 20%

30% 20% 20% 15% 15% 15% 10% 10% 10% 30% 15% 10% 50% 10% 10% 45% 30% 15% 50% 20% 10% 35% 25% 15% 90% 60% 30% 50% 35% 30% 20% 15% 0% 0% 0% 0%

1. How is profit determined?

Your profit P is determined by subtracting the cost C (the amount of money it costs to operate a business) from the revenue R (the amount of money you earn

2. Identify which price each product should be sold for to earn maximum profit. We should sell the product at $3 to earn maximum profit 3. Explain the relationship between costs and prices and demand and profits. Price is a function of supply and demand. Notice the word cost doesnt occur there. It is true that cost is, over the long term, a lower bound for price otherwise youd go out of business. It is also true that high upfront fixed costs can create barriers to entry and therefore lower supply. 4. Brainstorm a quick and innovative marketing mix (thinking carefully about the cost information) for the most profitable product if it was a: i. ii. iii. Hot, savoury food item Sweet drink Non-food/drink product