13. You serve on the board of director of Morton Salt Company. Your only product

Question

13. You serve on the board of director of Morton Salt Company. Your only product is those blue cans of table salt, which sell for 98 cents each at the grocery store. The board of directors is in the process of hiring a new CEO for Morton Salt Co. You ask each CEO candidate to recommend a pricing strategy for table salt. Candidate "B" recommends that Morton Salt Company reduce its price on table salt by 50% to stibulate sales Is this a good recommendation?

14. As you leave the offices of Morton Salt Company, you purchase a newspaper from a 12 year-old girl. Noticing that you have come out of the Morton Salt building, the girl says to you, "Mister, if i owned that salt company, I'd double the price of those blue cans of salt to $2.00. After asking her why, the kid says, "Heck, Mister, the price elasticity of demand is extremely elastic.. the people will buy it no matter how high the price is!" Is the girl's price recommendation for Morton Salt Company correct Why or why not? Os the girl's terninology correct? Why or why not?

The recommendation from theses questions are correct? or not?

I want to know why it's correct or not.

Explanation / Answer

13. Candidate B's recommendation will be correct if they have more competitors coming in. But if they hold major chunk in the market share, they dont have to lower the peices to 50%. The recommendation is incoprrect.

14. The terminology used by the girl is incorrect because when the elasticity of demand is extremely elastic, a small change in price will be having a huge impace on quantity demanded. The girl's recommendation based on her wrong terminology is definitely incorrect.

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