You work for Titanic Products, a manufacturer of electric kitchen accessories, as an assistant in market research. Titanic is currently developing a new kitchen gadget, a combination coffee grinder-toaster oven, to be offered for sale at $50 and stay at $50. The company estimates that long-run potential for this product is 25,000,000 households. Innovation rate and imitation rate for products in this category have tended to be in the ranges of 2% and 12% respectively in the past, and management plans to use the same figures in their projections for the new gadget.

1. If these parameters are correct, how long will it take for cumulative sales of this product to reach 5 million units? 10 million units? Plot quarterly sales figures and interpret the shape of the graph you obtained. If initial price remained at $50, but price were gradually decreased to $45 over the next few years, what impact would this have on sales patterns?

2. You think that Titanic is heading for a major disappointment with this product. First, you believe the market potential estimate is greatly overstated. Second, you feel that the innovation and imitation rates are somewhat overly optimistic. Revise each of these parameters downward (use your own judgment on how much to decrease each one), and assess the impact on the quarterly and cumulative sales pattern.