Question

Assume that you manage a firm that sells calculators. You want to sell calculators to both commercial users and home users, and so you have developed 2 types of calculators - fancy and basic calculators. Each customer type has the following valuations for each type of calculator:

	Home User	Commercial User
Fancy Calculator	$100	$200
Basic Calculator	$30	$50

If you have an 100 home users and 100 commercial users that at most will buy 1 calculator each, you will maximize total revenue by setting what price for the fancy calculator? (Write answer without the dollar sign.)

Answer 1

By setting the price of calculator 100 the probability of consumers who buy the fancy calculator,there will be growth in numbers of buyers or demand of quantity.

Suppose a commercial buyer wants to buy the calculator by 200 and he is getting that in 100 he will enjoy surplus of his utility and he can consume on more,household buyers can think that they are getting fancy calulator buy only spending 50 more they can get attracted to that price ,this price will also attract new consumers by the ratio of price and the supply quality-quantity.

Hence by setting the price at 100 I can earn more profit.