Already have an account? Get multiple benefits of using own account!
Login in your account..!
Remember me
Don't have an account? Create your account in less than a minutes,
Forgot password? how can I recover my password now!
Enter right registered email to receive password!
Analytical Approach
We will illustrate this through an example.
Example 1
A firm sells a product in a market with a few competitors. The average price charged by the competitors is Rs.10. The firm can follow any one of the pricing policies given below:
Match the competition price at Rs.10
Price two rupees above the competition at Rs.12
Price two rupees below the competition at Rs.8.
The firm knows the quantities it can sell at these prices:
Price (Rs.)
Quantity (Nos.)
8
10
12
15,000
10,000
7,500
The total cost of production is as below:
Quantity
Cost (Rs.)
95,000
80,000
75,000
To find out the price that the firm should charge, we must first determine the objective of the firm. Let us assume that the objective of the firm is to maximize profits. (The firm could easily have other objectives - to price the product always below the competitor's price in which case Rs.8 would be chosen or to price the product always above the competitors' price so that a higher price can be used to create the impression of a better quality in the minds of the consumers. In the latter case Rs.12 would be chosen).
To find out the price which would maximize the profits, we construct the following table:
Sales Quantity (Nos.)
Sales Value
Profit (Rs.)
1,20,000
25,000
1,00,000
20,000
90,000
We thus find that the profits are maximized at the price of Rs.8 per unit, and therefore this price should be chosen.
Though the analytical approach is quite simple and intuitive, it may not be possible to adopt this in all decision making situations. In reality, information regarding the average price charged by the competitors may not be available or may be dependent upon the price charged by the firm as the competitors may react to every change effected by the firm. The information regarding the exact quantities that can be sold at different prices may not be available or only a possible range of quantities may be known. Similarly, the cost of producing different quantities may not be exactly known.
TYPE I AND II Errors If a statistical hypothesis is tested, we may get the following four possible cases: The null hypothesis is true and it is accepted; The
Standard Deviation The concept of standard deviation was first introduced by Karl Pearson in 1893. The standard deviation is the most important and the popular measure of disp
Your company has developed a new product .Your company is a reputed company with 50% market share of same range of products. Your competitors also come with their new products equa
Methods of Forecasting Various techniques which are generally used in business forecasting are as under: 1. Forecasting through the opinion of heads of department
Skewness Meaning and Definition Literal meaning of skewness is lack of symmetry; it is a numerical measure which reveals asymmetry of a statistical series. According t
Using a random sample of 670 individuals for the population of people in the workforce in 1976, we want to estimate the impact of education on wages. Let wage denote hourly wage in
Case Problem: A Bipartisan Agenda for Change In a study conducted by Zogby International, more than 700 New Yorkers were polled to determine whether the New York state government w
CERTIFICATE OF AIRWORTHINESS FOR EXPORT When aircraft manufacturers go into series production of a new type of aircraft, then obviously they are hopeful of world wide sales. Sim
Stratified Sampling Stratified Sampling is generally used when the population is heterogeneous. In this case, the population is first subdivided into several parts (or s
get a questionnaire that captured age at first marriage
Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!
whatsapp: +91-977-207-8620
Phone: +91-977-207-8620
Email: [email protected]
All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd