Problem 1

The total contended market for your product is 100,000 units. That represents 20% of the overall market.

Lets assume that your company can capture the entire contended market by lowering your unit price to benefit from the price elasticity associated with the type of product that you sell.

Currently, your company enjoys 80% of the saturated market and has 50% Gross Profit Margin.

a) What would be the maximum level of price reduction (%) from the current retail price that would preserve your $ level of gross profit and would allow to capture the total of the contended market.

Problem 2

The following describes your company's upstream and downstream value chain:

1. Retail Price:

2. Retail Profit : 50%

3. Distributor's Profit: 40%

4. Wholesaler's Profit 30%

5. Producer Profit: 25%

6. The cost of material represents 45% of the overall producer's cost.

7. The other costs are $10

Find the corresponding retail price.