Imagine that you are a marketing manager responsible for a particular B2B product line that consists for colorants for paint products. The customers for your products produce paint for big box stores. You have current gross margins of 20%, on current revenues of $1,000,000. Your objective is to grow your gross profit. The sales manager responsible for sales of the product line says, If you allow me to lower prices by only 2%, I promise you that we can deliver more profit!

1. How elastic do you think the demand is in this market? (Said differently, how sensitive is the demand to changes in price?)
   1. Would a paint manufacturer buy more if the price is decreased, and if so, why? If not, why not?
2. Given the information that you have, calculate (and show your work) the following:
   1. Current gross profit $
   2. Current COGS $
   3. Volume Growth required to deliver the same Gross Profit $ (or Breakeven Volume Growth)
3. After determining the volume growth required to generate the same gross profit $ after the price decrease, what you would want to know prior to making your decision regarding whether or not to lower the price? Considerations might include:
   1. Determining where specifically growth could come from due to lower prices alone.
   2. How much additional growth BEYOND breakeven growth would you want to hold sales accountable for in order to make the price decrease worthwhile? (In other words, why grow if you only plan to generate the same gross profit dollars that you currently are generating?) Provide a $ amount for this answer
4. Would you agree to the proposal by sales? Why or Why not?

The calculations (Gross Profit, COGS, etc.) are most important. Thank you in advance!