Say that consumers evaluate small office printers based primarily on two attribu

Question

Say that consumers evaluate small office printers based primarily on two attributes - pages printed per minute (ppm) and printing resolution (dpi). The Brother MFC 7440N printer prints 11ppm at a resolution of 2400 dpi, and is priced at $260. The HP Pro M1217 prints 19ppm at a resolution of 1200dpi, and is priced at $275.

If a customer has a budget of $1000, and a high marginal rate of substitution of ppm for dpi, which printer will they choose?

Answer
The Brother
The HP
Cannot be determined
Both

Explanation / Answer

Because there is a high marginal rate of substitution of ppm for DPI, this means that the customer would be willing to give up a lot of PPM for DPI. So we can infer that DPI is more important to the customer than PPM. When looking at how much DPI you get per dollar, you obtain the following: Brother: 2400 DPI / $260 = 9.23 DPI/$ HP: 1200 DPI / $275 = 4.36 DPI / $ Because with the Brother you can get more DPI per dollar, it is the better buy.

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