Purchase Solution

# Aggressive Market Entry Firms

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QiPod = 100,000 - 250 PiPod + 100 PDell + 50 PSamsung + 1,000 Y + 200 ADVApple iPod

QiPod is quantity demanded in hundreds, PiPod is the price of Apple iPod in dollars, PDell is the price of the Dell DJ in dollars, PSamsung is the price of Samsung in dollars, Y is per capita income measured in thousands of dollars, and ADVApple iPod is Apple's advertising expenditures to promote the new iPod in millions of dollars. The current values of the independent variables are as follows:

Calculate elasticity values for each independent variable. (please walk though each value equation) I'm a little confused.

Elasticity is defined as: , i.e., ration of percentage change in quantity demanded to the percentage change in price. The elasticity values are as given in the table.

Variable Elasticity Values
PiPod -250
PDell 100
PSamsung 50
Y 1000

It is my understanding that revenue max = MR=0. Can you help walk me through gthe table and calculations for table 5?

Suppose that the incremental cost of producing another iPod player is \$100 and that this incremental value prevails over the entire relevant range of output. Consider three possible pricing strategies for Apple: profit maximization, revenue maximization, and "aggressive market entry" pricing. Complete Table 5 with the appropriate quantities and prices for each pricing strategy.

Table 5: Quantity and Price for Alternative Pricing Strategies

Pricing Strategy Quantity Price
Profit Maximizing
Revenue Maximizing
"Aggressive market entry"

Marginal Cost = \$100 which remains constant.
For profit maximization, MR = MC
For revenue maximization, MC is irrelevant. Revenue is maximized when PQ is maximized.
In aggressive market entry, the firm's goal is to capture the market irrelevant of whether it makes losses in the short run.

##### Solution Summary

The aggressive market entry firms are examined. The expert determines profit maximizing and revenue maximizing agents.

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QiPod = 100,000 - 250 PiPod + 100 PDell + 50 PSamsung + 1,000 Y + 200 ADVApple iPod

QiPod is quantity demanded in hundreds, PiPod is the price of Apple iPod in dollars, PDell is the price of the Dell DJ in dollars, PSamsung is the price of Samsung in dollars, Y is per capita income measured in thousands of dollars, and ADVApple iPod is Apple's advertising expenditures to promote the new iPod in millions of dollars. The current values of the independent variables are as follows:

PiPod = \$399, PDell = \$329, PSamsung = \$399, Y = 40, ADVApple = 125.

Calculate elasticity values for each independent variable. (please walk though each value equation) I'm a little ...

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