6. Whatsupwit U. has decided to allow beer consumption at its football games. Yo
ID: 2793136 • Letter: 6
Question
6. Whatsupwit U. has decided to allow beer consumption at its football games. You have been fortunate enough to secure the franchise for that operation, which is also authorized to sell hot dogs. Because you are a business school graduate, you have done some survey research that indicates the following are the maximum amounts spectators of two different persuasions would be willing to pay for these two items (10 points) One Hot Dog Male S3.00 Female $4.00 One Beer $2.50 $1.00 Your research indicates that attendance at the games will be about equally divided between male and females. If the two items are priced separately, what combination of prices will yield the maximum total revenue? (5 points) What price would be charged if the two items are bundled, and how much would this strategy affect total revenue? (5 points) a. b.Explanation / Answer
Male Female Total (a) Assuming a population of 100 50 50 100 Revanue = Price x population Combination be - (i) Hot dog 3 150 150 300 Beer 2.5 125 0 125 Revanue = 425 (ii) Hot dog 3 150 150 300 Beer 1 50 50 100 Revanue = 400 (iii) Hot dog 4 0 200 200 Beer 2.5 125 0 125 Revanue = 325 (iv) Hot dog 4 0 200 200 Beer 1 50 50 100 Revanue = 300 Where price is more then what they are willing to pay they will not buy. E.g. (i) price of beer is 2.5 whereas female are willing to pay maximum 1 so they will not buy. Therefore price charged = Hot dog 3 Beer 2.5 Because it provides maximum revanue. (b) If prices are bundeled - Male Female Total Assuming a population of 100 50 50 100 (i) Price = (3 + 2.5) = 5.5 275 0 275 (ii) Price = (3 + 1) = 4 200 200 400 (iii) Price = (4 + 2.5) = 6.5 0 0 0 (iv) Price = (4 + 1) = 5 250 250 500 Price that should be charged = 5 Because it provides maximum revanue. Here maximum a female is willing to pay is (4+1) = 5 And maximum a male is willing to pay is (3 + 2.5) = 5.5 Any price above that will not be accepted by respective customers. Please provide feedback… Thanks in Advance :-)
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