What would you need to sell your product

Reference no: EM133261043

Question 1: You invested $50,000 of one-time R&D in year 1 and your fixed costs are $10,000 per year and your variable costs are $5/unit. Assuming that your product is completely inelastic (demand will not change depending on your pricing decision) and expected demand is 5000 units/year, what would you need to sell your product for (lowest price) to break even after 2 years?

Question 2: Let's say that volume is not constant from PROBLEM 2 but is relatively inelastic One option is to price it at $20 for a demand of 5000 units per year. The other option is to price is at $16 for volume of 5500 units. What is the price elasticity? How much profit over 2 years would you make under each of the 2 pricing options in using the costs in Problem 2? Which pricing option would you go with? Show total profitability.

Reference no: EM133261043

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