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Estimate the profit-maximizing price for souvenir sheets

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Reference no: EM132619767

The postal service of St. Vincent, an island in the West Indies, obtains a significant portion of its revenues from sales of special souvenir sheets to stamp collectors. The souvenir sheets usually contain several high-value St. Vincent stamps depicting a common theme, such as the life of Princess Diana. The souvenir sheets are designed and printed for the postal service by Imperial Printing, a stamp agency service company in the United Kingdom. The souvenir sheets cost the postal service $1.05 each. St. Vincent has been selling these souvenir sheets for $8.00 each and ordinarily sells about 59,000 units. To test the market, the postal service recently priced a new souvenir sheet at $9.00 and sales dropped to 49,000 units.

Required:

Question 1. Calculate the contribution margin for sale price of $8.00 each or $9.00 each?

Question 2. Estimate the price elasticity of demand for the souvenir sheets. (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 4 decimal places.)

Question 3. Estimate the profit-maximizing price for souvenir sheets. (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Reference no: EM132619767

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