Pricing

1. The current price of a product is $12. At this price the company sells 60 items
a month. One month the company decides to raise the price to $14, but only
45 items are sold at this price.
Determine the demand equation.
2. The current price of a product is $30 and the producers sell 100 items a week
at his price. One week the price is dropped by $3 as a special offer and the
producers sell 150 items.
Determine the demand equation.
3. Maximum demand for JLs product is 10,000 units per annum. Demand will
reduce by 100 units for every $1 increase in the selling price. JL has calculated
that the profit-maximising level of sales for the coming year will be 8,000
units.
Calculate the price at which these units will be sold.
4. Maximum demand for ALs product is 8,000 units per annum. Demand will
reduce by 50 units for every $1 increase in the selling price.
AL has calculated that the profit-maximising selling price for the coming year
will be $10.
Calcualte the profit-maximising level of sales.
5. XYZ is the only manufacturer of a rpoduct called X. The variable cost of
producing the X is $1.50 at all levels of output.
During recent months the X has been sold at a unit price of around $6.25.
various small adjustments (up and down) have been made to this price in an
attempt to find a profit maximising selling price.
XYZ s commercial manager has recently commissioned a study by a firm of
marketing consultants to investigate the demand structure for the X. The
consultant have reported back that at a unit price of $10 there is no demand
for Xs but that demand increased by 40 units with each $0.01 that the unit
price is reduced.
Calcualte the profit maximising unit selling price for the X and the quantity to
be sold at that price.
6. When the price of a product Y is $48, 70 units are demanded each week. When
the price is $78, only 40 units are demanded each week. The manufacturers
fixed costs are $1,710 a week and variable costs are $9 per unit.
(a) Show that the equation of the demand function linking price (P) to quantity
demanded (Q), assuming the relationship between price and quantity
demanded is linear, is P = 118 Q
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Pricing
(b) Recommend a unit price which would maximise profit, and find the quantity
demanded at that price.

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