. Simple Flu Shot Pricing (7 pts) It’s that season again! You have engaged in a
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Question
. Simple Flu Shot Pricing (7 pts)
It’s that season again! You have engaged in a market study to categorize your patients’ willingness to pay for their flu shot into 8 equal sized groups: $40, $35, $30, $25, $20, $15, $10, $5). All of your costs are fixed except labor and materials, which cost $10 per flu shot.
a. What price should you charge for a flu shot? Does your answer depend on the total number of patients?
b. Suppose your market research tells you that the four lowest value groups are all students. Should you offer a student discount? If so, how much?
Explanation / Answer
a.
Labor and material costs are variable cost. The price would be charged, which covers atleast variable cost per unit $10. At this price there will be no-profit-no-loss situation and the company can stay in the business.
The number of patients is irrelevant here.
b.
Student discount could be offered up to the extent of meeting variable cost per unit $10.
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