Question

1. Briefly explain the relationship between revenue and price elasticity of demand.

2. The JC Penney stock was trading at $42 in February 2012 when Ron Johnson was hired as CEO by JC Penney after he created the Apple stores and reinvented Target stores. During his management of the company, he introduced dramatic departures from J.C. Penney's traditional retail approach (high-low pricing), and enacted changes quickly to eliminate sales and introduced 'everyday low pricing'. As of September 20 2018, the stock price is $1.97. Read the following Reuters article to learn the pricing strategy JC Penney initiated in 2012 in order to boost profits. What is the assumption that JC Penney CEO Johnson was making about the price elasticity of demand for the company's products when he eliminated sales (elastic or inelastic)? What were the concerns for this new strategy? New Pricing Strategy Could be Penney Wise but Risky (2012)

3. Also read the following articles and explain why JC Penney's strategy did not work. What is JC Penney customers' actual price elasticity of demand for retail clothing products (elastic or inelastic)? -When you answer your questions, think about the type of JC Penney products and the determinants of elasticity. What is the difference between Apple/Target customers and JC Penney customers? -Your answer should include how revenue can increase or decrease as a result of a change in price depending on the price elasiticity of demand.