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    Chapter 5 DEMAND ANALYSIS
    Mark Hirschey Managerial Economics 11th edition.

    Q5.5
    "When I go to the grocery store, I find cents-off coupons totally annoying. Why can't they just cut the price and do away with the clutter?" Discuss this statement and explain why coupon promotions are an effective means of promotion for grocery retailers, and popular with many consumers.

    Q5.7
    An estimated 80 percent increase in the retail price of cigarettes is necessary to cause a 30 percent drop in the number of cigarettes sold. Would such a price increase help or hurt tobacco industry profits? What would be the likely effect on industry profits if this price boost was simply caused by a $1.50 per pack increase in cigarette excise taxes?

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    Solution Preview

    Question 5.5
    Coupons is a way of discrimating pricing. Not all consumers are attracted towards coupons and would like to use them. But some of them are interested and will make use of them. Because of these two segments, the companies are able to price discrimnate between these groups and are able to earn better profits.
    If the company is willing to increase its sales, one way to do so is to reduce the price. By reducing the price, the consumers who are currently not willing topurchase will purchase the product, however, by doing so the price received ...

    Solution Summary

    Emphasize why coupon promotions are an effective means of promotion for grocery retailers, and popular with many consumers.

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