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MKTG 380 - PRICING HOMEWORK PROBLEMS 1. Assume that for a given product the following price/demand relationships exist. Study the directional changes in price and total revenue and indicate whether demand is elastic or inelastic within the $20 to $25 range and within the $25 to $30 range using the ARC Elasticity formula. PRICE QUANTITY DEMANDED $20 62,000 units $25 48,000 units $30 45,000 units 2. The Wino Company plans to introduce a new wine into the marketplace. The product has an annual fixed cost of $2 million and a unit variable cost of $4. The firm's marketing research department estimates the demand schedule below. Relate this information to the concept of breakeven profitability analysis discussed in class and determine at which price the company sell the product given different objectives. Discuss. PRICE PER BOTTLE DEMAND (BOTTLES) $7.00 1,500,000 6.50 2,000,000 6.00 2,300,000 5.50 2,500,000 3. Wal-Mart is buying 10,000 shirts that will sell to the ultimate consumer for $20 each. Because they are a large retailer and the fact that they do their own warehousing, their
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