Two women I went to college with have launched a shoe company, Margaux.When they initially launched, they just sold one style of shoe for one price.Then they decided to offer two types of shoes one that is standard and one that is fancier and higher quality, which they called the "Italian hand-crafted shoe."The standard costs them $5 per pair to produce and the "Italian hand-crafted shoe" costs them $30 per pair.

Their market research shows that they have two kinds of consumers -- high-spending and low-spending customers - each with different WTPs for the two products (summarized below)Each costumer will buy at most one unit of the product.There are 200 high spenders in their market and 400 low spenders.

How much of each or both shoes should the company produce and what price should they charge?Show your work and explain your reasoning.

Standard

Italian hand-crafted

# of people in group

High spenders

$90

$110

200

Low spenders

$60

$90

400