8.4 Price-Volume Pricing (Figures 8-23 to 8-25)The price elasticity for personal computers is estimated to be –2. For the PC manufacturer shown, evaluate the sales and profit impact of a 10% price increase and a 10% price decrease.For each pricing strategy, determine the break-even market share and discuss the profit risk associated with it. FIGURE 8-24 PRICE-VOLUME STRATEGY AND PROFIT IMPACTPerformance FactorMetricCurrentStrategyImpactMarket Demandunits50,00010% Price50,000DecreaseMarket Share%20.0%25.0%Volume Soldunits10,00012,500Average Selling Price$/unit$1,000$900Net Sales$$10,000,000$11,250,000Unit Cost$/unit$700$700Percent Margin%30.0%22.2%Gross Profit$3,000,000$2,500,000FIGURE 8-25 PRICE-VOLUME PROFITABILITYPerformance FactorMetricCurrentStrategyImpactMarket Demandunits50,00010% Price50,000DecreaseMarket Share%20.0%30.0%Volume Soldunits10,00015,000Average Selling Price$/unit$1,000$900Net Sales$$10,000,000$13,500,000Unit Cost$/unit$700$700Percent Margin%30.0%22.2%Gross Profit$$3,000,000$3,000,000| FIGURE 8-23 PRICE-VOLUME SALES STRATEGYPerformance FactorMetricCurrentStrategyImpactMarket Demandunits50,00010% Price50,000DecreaseMarket Share%20.0%25.0%Volume Soldunits10,00012,500Average Selling Price$/unit$1,000$900Net Sales$10,000,000$11,250,000

The elasticity of demand is the responsiveness of the quantity demanded when the price of the goods…

8.4 Price-Volume Pricing (Figures 8-23 to 8-25) The price elasticity for personal computers is estimated to be –2. For the PC manufacturer shown, evaluate the sales and profit impact of a 10% price increase and a 10% price decrease. For each pricing strategy, determine the break-even market share and discuss the profit risk associated with it.

8.4 Price-Volume Pricing (Figures 8-23 to 8-25) The price elasticity for personal computers is estimated to be –2. For the PC manufacturer shown, evaluate the sales and profit impact of a 10% price increase and a 10% price decrease. For each pricing strategy, determine the break-even market share and discuss the profit risk associated with it.

Economics Today and Tomorrow, Student Edition

1st Edition

ISBN:9780078747663

Author:McGraw-Hill

Publisher:McGraw-Hill

Chapter5: Buying The Necessities

Section: Chapter Questions

Problem 20AA

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