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Vacations-R-Us.com, the online cruise seller, wants to increase its total revenue. One strategy is to offer a 10% discount on every cruise it sells. Vacations-R-Us.com knows that its customers can be divided into two distinct groups according to their likely responses to the discount. The accompanying table shows how the two groups respond to the discount. Volume of sales before the 10% discount group A(sales per week) Group B(sales per week) 1.55 million 1.50 million 1.65 million 1.70 million Volume of sales after the 10% discount a. Using the midpoint method, calculate the price elasticities of demand for group A and B. b. Explain how the discount will affect total revenue from each group. c. Suppose Vacations-R-Us.com knows which group each customer belongs to when he logs on and can choose whether or not to offer the 10% discount. If the company wants to increase its total revenue, should discounts be offered to group A or to group B, to neither group, or to both groups?

Vacations-R-Us.com, the online cruise seller, wants to increase its total revenue. One strategy is to offer a 10% discount on every cruise it sells. Vacations-R-Us.com knows that its customers can be divided into two distinct groups according to their likely responses to the discount. The accompanying table shows how the two groups respond to the discount. Volume of sales before the 10% discount group A(sales per week) Group B(sales per week) 1.55 million 1.50 million 1.65 million 1.70 million Volume of sales after the 10% discount a. Using the midpoint method, calculate the price elasticities of demand for group A and B. b. Explain how the discount will affect total revenue from each group. c. Suppose Vacations-R-Us.com knows which group each customer belongs to when he logs on and can choose whether or not to offer the 10% discount. If the company wants to increase its total revenue, should discounts be offered to group A or to group B, to neither group, or to both groups?

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Vacations-R-Us.com, the online cruise seller, wants to increase its total revenue. One strategy is to offer a 10% discount on every cruise it sells. Vacations-R-Us.com knows that its customers can be divided into two distinct groups according to their likely responses to the discount. The accompanying table shows how the two groups respond to the discount. Volume of sales before the 10% discount group A(sales per week) Group B(sales per week) 1.55 million 1.50 million 1.65 million 1.70 million Volume of sales after the 10% discount a. Using the midpoint method, calculate the price elasticities of demand for group A and B. b. Explain how the discount will affect total revenue from each group.
Transcribed Image Text:Vacations-R-Us.com, the online cruise seller, wants to increase its total revenue. One strategy is to offer a 10% discount on every cruise it sells. Vacations-R-Us.com knows that its customers can be divided into two distinct groups according to their likely responses to the discount. The accompanying table shows how the two groups respond to the discount. Volume of sales before the 10% discount group A(sales per week) Group B(sales per week) 1.55 million 1.50 million 1.65 million 1.70 million Volume of sales after the 10% discount a. Using the midpoint method, calculate the price elasticities of demand for group A and B. b. Explain how the discount will affect total revenue from each group.
c. Suppose Vacations-R-Us.com knows which group each customer belongs to when he logs on and can choose whether or not to offer the 10% discount. If the company wants to increase its total revenue, should discounts be offered to group A or to group B, to neither group, or to both groups?
Transcribed Image Text:c. Suppose Vacations-R-Us.com knows which group each customer belongs to when he logs on and can choose whether or not to offer the 10% discount. If the company wants to increase its total revenue, should discounts be offered to group A or to group B, to neither group, or to both groups?
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