Xiaomi Inc. is the world's 3rdlargest smartphone maker and is headquartered in Beijing, China. Xiaomi employs a very different strategy from other smartphone makers like Apple and Samsung. Xiaomi prices its smartphones at close to the marginal cost of production and makes a large portion of its profits via the sale of phone related, peripheral devices, smart home gadgets, apps, and online videos. While Xiaomi is technically not a monopoly, it does have market power and the ability to set its own prices.

This month, Xiaomi released in India the Xiaomi Lite 5GNE ("Lite5G"), the latest Android powered smartphone. The price of the Lite5G at launch in India was $300 (USD). Xiaomi has determined that demand in India for the Lite5G is:

qIndia= 1,500 - 2P

where qIndiais the number of Lite5G smartphones sold (in thousands) and P is the price of the Lite5G (in US dollars).

a)Answer the following questions with respect to Xiaomi's sales and pricing at launch. Be sure to provide evidence for your answers.

1. What are sales in India at launch?
2. What is the own price elasticity for the Lite5G?
3. What is the revenue maximizing price?

b)Answer the following questions with respect to Xiaomi's sales and pricing at launch.Be sure to provide evidence for your answers and explain your reasoning for each.

1. How does the current price (i.e., launch price) compare to the revenue maximizing price?
2. Using the information that you have, is the launch price the profit maximizing price?
3. (How) should Xiaomi adjust the price of this phone to increase profits?

c)Earlier this year, Xiaomi launched the Lite5G in another country (i.e., not India and with a different demand curve than shown above). Initial sales were around 800 (in thousands) and the own price elasticity in this market is -0.75 at an initial price of $350. However, given that Xiaomi is dependent upon sales of its peripheral devices, apps and other phone accessories for its profits, it's critical to increase the sales of the smartphones, since only Xiaomi smartphone owners buy these additional accessories. As such, Xiaomi has determined that target sales are 1,010 phones (in thousands).

1. What price does Xiaomi need to charge to reach this sales target?
2. How would this new price compare to the profit maximizing price for the smartphones? Explain.