I greatly appreciated for your help. Please address each question in your own wo
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I greatly appreciated for your help. Please address each question in your own words.
Assignment: Participate in the Graded Discussion for Chapter 19. Respond to these questions with your comments or offer your own observations. If a firm can increase its total revenue by raising its price, shouldn't it do so? Explain your answer. Why is it important for managers to understand the concept of break-even points? Are there any drawbacks to using break-even analysis? . . How important is it for a company to estimate ROI before launching new product? What does a target ROI enable that company to do? How does the stage of a product's life cycle affect price? Give some examples. The U.S. Postal service regularly raises the price of a first-class stamp but continues to operate in the red year after year. Is uniform delivered pricing the best choice for first-class mail? Explain your answer. * · If price fixing results in a lower price to the consumer (the companies involved only want to build share), should it be illegal? Why or why not?Explanation / Answer
1. If demand is inelastic, i.e. consumer is not price sensitive; price can be increased to increase total revenue. But, if the demand is elastic, i.e. consumer is price sensitive; price increase might lead to a fall in demand which will eventually bring the firm’s sales/total revenue down in a longer run.
Demand is the key determinant of price, hence when establishing the price a firm needs to determine the demand of the product. In a typical demand schedule, price and demand have an inverse relationship, but in prestige products there is a direct relationship. Hence, demand elasticity needs to be considered when setting or changing prices. Hence, an increase in price leads to lower sales for elastic product but no change in sales for an inelastic product, thus giving inelastic demand the pricing power.
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