The objectives are: to find the different price demand elasticities, costs, revenue profits for these years. And most important: I need to find the optimal price that we should establish for our product in 2008. The price that will give us the biggest profit. When I say find the price that will give us the biggest profit I mean the combination of (p) price+ (q) quantity (demand), taking into account thar the demand will obviously change depending on the price, im not sure if it was clear.

This is the case study:

A company was selling their products at 75$, but they found out they were losing money because the cost of making the product was higher than the sale price. They changed the price to 99$, but now they are losing sales every year, even though the market is growing year by year. They give us these 2 tables:

Exhibit 201.1 Estimated costs of Permashine at various production volumes Cost (p/bottle) Annual production ('000 bottles) 250 300 400 500 600 700 800 Direct labour 17.5 17.5 17.0 17.0 17.0 17.5 18.0 Materials 8.0 8.0 8.0 8.0 8.0 8.0 8.0 Dept.overhead Variable 9.0 9.0 9.0 9.0 9.0 9.0 9.0 Fixed 14.4 12.0 9.0 7.2 6.0 5.1 4.5 Factory overhead (20% of direct labour) 3.5 3.5 3.4 3.4 3.4 3.5 3.6 Factory cost 52.4 50.0 46.4 44.6 43.4 43.1 43.1 Selling & administration cost at 80% of factory cost 41.9 40.0 36.3 35.7 34.7 34.5 34.5 Total cost 94.3 90.0 82.7 80.3 78.1 77.6 77.6 Exhibit 201.2 Permashine: sales and price 2001 2002 2003 2004 2005 2006 2007 Permashine sales ('000 bottles) 400 429 486 525 536 462 391 Total industry sales ('000 bottles) 2000 2050 2250 2200 2300 2650 2900 Permashine % of market 20 21 22 24 23 17.5 13.5 Permashine price (p) 60 70 70 75 75 99 99 Competitors' price range (p) 56-62 65-70 65-70 69-75 69-75 70-80 75-80