PROBLEM You are the owner of a small company in Hong Kong. You have developed a small but powerful solar panel which customers can use to charge their cellphones twice as quickly as any other product currently on the market. You have spent $HK2m on developing the product.

It will cost 5:50 HK cents per unit to produce the solar panel and connectors and you have full protection from copying. Your firm spends $1.6 m per year on rent, salaries and computing facilities. You are required to set a price for this product. The aim of your company is to make as much profit as possible in the next year.

The companys accountant recommends a price of $99.99, which represents the cost plus a margin of around $90 which he believes is the accepted norm in the industry.

The marketing director recommends setting the price with reference to the price for competing but less powerful panels. He believes that would give a price of about $200, but he is not sure of his data, which needs to be checked.

Your own proposal is to charge $150, which you think will give you the return on investment that you wants.

Prepare a report which: a) evaluates the three recommendations (15 of the marks out of 100) b) uses sound economic reasoning to determine a price (65 marks out of 100) c) outlines any factors that would lead to the adjustment of the recommended price, after its launch, and the direction of that adjustment (20 marks out of 100)