HC Computers Inc. is revamping its most popular line of desktop computers and is in the...
HC Computers Inc. is revamping its most popular line of desktop computers and is in the process of deciding the price of the desktop computer. Respondents were provided a description of the computers and provided information about all the pros and cons of the computer. They were then presented prices of $500, $1000 and $1200 and asked to indicate their purchase intention on a 7- point scale, from “Definitely Not Buy” to “Definitely Would Buy”. The results are shown below
|
Stated Price |
|||
|
$500 |
$1000 |
$1200 |
|
|
1. Definitely Would Buy |
40% |
20% |
15% |
|
2. Almost Surely Would buy |
20% |
13% |
10% |
|
3. Probably Would Buy |
11% |
15% |
20% |
|
4. Undecided |
2% |
8% |
5% |
|
5. Probably Not Buy |
10% |
16% |
25% |
|
6. Almost Surely Not Buy |
8% |
7% |
5% |
|
7. Definitely Not Buy |
9% |
21% |
20% |
1. Using a conservative approach to identify potential buyers of the computer, draw the estimated price response or demand curve for HC’s desktop computer. Clearly mark the different prices and corresponding demands on the figure.
- Assuming that the original price for the computer was $900 and HC’s original market share was 40%, calculate the elasticity of demand for each of the alternative proposed price points. Choosing which of the three prices will generate the highest increase in revenue for HC?
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