Vacations-R-Us.com, the online cruise seller, wants to increase its total revenue. One strategy is to offer a 10% discount on every cruise it sells. Vacations-R-Us.com knows that its customers can be divided into two distinct groups according to their likely responses to the discount. The accompanying table shows how the two groups respond to the discount. Volume of sales before the 10% discount group A(sales per week) Group B(sales per week) 1.55 million 1.50 million 1.65 million 1.70 million Volume of sales after the 10% discount a. Using the midpoint method, calculate the price elasticities of demand for group A and B. b. Explain how the discount will affect total revenue from each group. c. Suppose Vacations-R-Us.com knows which group each customer belongs to when he logs on and can choose whether or not to offer the 10% discount. If the company wants to increase its total revenue, should discounts be offered to group A or to group B, to neither group, or to both groups?

Vacations-R-Us.com, the online cruise seller, wants to increase its total revenue. One strategy is to offer a 10% discount on every cruise it sells. Vacations-R-Us.com knows that its customers can be divided into two distinct groups according to their likely responses to the discount. The accompanying table shows how the two groups respond to the discount. Volume of sales before the 10% discount group A(sales per week) Group B(sales per week) 1.55 million 1.50 million 1.65 million 1.70 million Volume of sales after the 10% discount a. Using the midpoint method, calculate the price elasticities of demand for group A and B. b. Explain how the discount will affect total revenue from each group. c. Suppose Vacations-R-Us.com knows which group each customer belongs to when he logs on and can choose whether or not to offer the 10% discount. If the company wants to increase its total revenue, should discounts be offered to group A or to group B, to neither group, or to both groups?

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter12: More Realistic And Complex Pricing

Section: Chapter Questions

Problem 9MC: After running a promotional campaign, the owners of a local hardware store decided to decrease the...

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Nile.com, the online bookseller, wants to increase its total revenue. One strategy is to offer a 10% discount on every book it sells. Nile.com knows that its customers can be divided into two distinct groups according to their likely responses to the discount. The accompanying table shows how the two groups respond to the discount. Group A Group B (sales per week) (sales per week) Volume of sales before the 10% discount 1.55 million 1.50 million Volume of sales after the 10% discount 1.65 million 1.70 million Using the midpoint method, calculate the price elasticities of demand for group A and group B. Explain how the discount will affect total revenue from each group.
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