The Kweikuma Corporations executive vice president circulates a memo to the firms top management in which he argues for a reduction in the price of the firms product. He says such a price cut will increase the firms sales and profits.

i. The firms marketing manager responds with a memo pointing out that the price elasticity of demand for the firms product is about 0.5. Why is this fact relevant? (5 marks)

ii. The firms president concurs with the opinion of the executive vice president. Is he correct? Explain. (5 marks)

iii. Comment on the following statement: Price discrimination cannot take place unless consumers can be isolated into groups and the goods cannot be sold by one group to other groups. (10 marks)

Question

The Kweikuma Corporations executive vice president circulates a memo to the firms top management in which he argues for a reduction in the price of the firms product. He says such a price cut will increase the firms sales and profits.

i. The firms marketing manager responds with a memo pointing out that the price elasticity of demand for the firms product is about 0.5. Why is this fact relevant? (5 marks)

ii. The firms president concurs with the opinion of the executive vice president. Is he correct? Explain. (5 marks)

iii. Comment on the following statement: Price discrimination cannot take place unless consumers can be isolated into groups and the goods cannot be sold by one group to other groups. (10 marks)

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The Kweikuma Corporations executive vice president circulates a memo to the firms top management in which he argues for a reduction in the price of

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