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Business decisions to maximize profits

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Select an existing good or service from the Will Bury's Price Elasticity, Incremental Costs, or Thomas Money Service Inc. scenarios, or select an existing business with which you are familiar.

Please provide help on writing a business proposal to improve an existing good or service for the chosen company. Include assumptions about the elasticity of demand and the market structure for the company's good or service.

Include rationale for the following questions:

* How will you increase revenue?

* How will you determine the profit-maximizing quantity?

* How could you use the concepts of marginal cost and marginal revenue to maximize profit? What information do you need to determine this? Without this information, how would you make a decision?

* What is your suggested mix of pricing and non-pricing strategies? Explain your answer.

* Can you create or increase barriers to entry? If so, how?

* How will you increase product differentiation?

* Are there other ways to minimize costs for the product?

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Solution Preview

Here is some advice on how to handle each question:

>Include assumptions about the elasticity of demand and the market structure for the company's good or service.

Depending on the number of sellers in your industry, the differentiation of products and the barriers to entry, your market structure could be monopoly, oligopoly, monopolistic competition or perfect competition. The price elasticity of demand ranges from relatively low in a monopolistic market to very high in a perfectly competitive market. The higher the price elasticity of demand, the more a change in price will impact demand for your product.

>How will you increase revenue?

There are two basic ways to do it. 1: Increase demand for your product, shifting your demand curve to the right. You can do this by adding features to your product or ...

Solution Summary

Advice on how to use economic theory to help your business. Topics covered include how to increase revenue, maximize profits, increase barriers to entry, increase product differentiation, and minimize costs.


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