- Rmie Uired 3 01 22 Tal 5 Points Mazoon Is Introducing A New Product To The Market And Found Out The Fol Lowing Infor 1 (459.2 KiB) Viewed 50 times
23/01/22 Revenue Management 2. (10 points) Explain the incremental cost pricing in an airline industry. You are required to draw the demand curve and explain the two main components including incremental profit and marginal cost.
Mand 134 (20 points) A car manufacturer is going to produce a now vehiclo and wants to determine the amount of annual capacity it should build. The new vehicle will well for $25,000 and have a variable cost of $19,000. Building a unit of annual capacity will cost $2.000 ind cach unit of capacity will cost $1,500 annually to maintain regardless of whether the capacity is used or not. Toyota is using a 10-year planning horizon and has forecasted demand over the 10-year period as low, medium, or high. Low demand would be approx- imately 400,000 vehicles per year for 10 years. Medium demand would be approximately 900,000 vehicles per year for 10 years. High demand would be approximately 1,300,000 per year for 10 years. The estimated probabilities are given in the table below, The company needs to select the best capacity level. P vehicles Instruction: 1. Draw the decision tree. 2. Calculate the expected value for each random event. 3. Decide what capacity level Toyota should choose. Annual Demand Probability Low 400,000 0.25 0.5 High1,300,000 0.25 Medin900,000
4. (15 points) Suppose the willingness to pay function and demand for a daily product is: w(p) (p-1)2 and D = 20 000 If the price-response function is calculated by: d(p) = D(1 - w(p)) and the incremental cost is C=1.2, calculate the total margin maximising price?