Question 1

Your Best Brand Bike Shorts - BBB Shorts have been flying off the shelf. Your chief economist tells you that during the Covid-19 pandemic, "the taste for bicycling has changed. The price elasticity of demand is much more inelastic. The price elasticity of demand has decreased from -5.76 to -2.70."

Before the campaign, your price was $240 per pair of BBB Shorts. What should the new price be?

Please enter the new price here: $[a] (Please provide step by step response)

Question 2

You operate a Caribbean destination resort. You currently offer plans for a cruise departing from the resort and plans for a casino stay. It is expected that in 2021 there will be some return to more normal travel. You will re-launch your advertising for 2021 announcing that customers will be able to do both for one price. Your marginal cost per customer across both tours is $4800.

Customer Preferences

Cruise Casino

Customer1 $7,000 $3,000

Customer2 $2,000 $6,000

Given the preferences, would bundling improve profits over the high-cost strategy?Support your conclusion by showing if (by how much) profits differ under each strategy, bundle versushigh price.

please provide step by step response:

Question 3

Follow up questionto #2 question (note that the dollar amounts have not changed from the previous scenario.)

You operate a Caribbean destination resort. You currently offer plans for a cruise departing from the resort and plans for a casino stay. It is expected that in 2021 there will be some return to more normal travel. You will re-launch your advertising for 2021 announcing that customers will be able to do both for one price. Your marginal cost per customer across both tours is $4800.

Customer Preferences

Cruise Casino

Customer1 $7,000 $3,000

Customer2 $2,000 $6,000

You know that about 21% of your customers decline cruises because of seasickness. At least 12% decline the casino trip saying they don't believe in gambling. As a rough approximation, you estimate that approximately 33% of your customers will never bundle. Given the preferences distribution, will the mixed bundling increase profits? You must show the calculations that support your conclusion.