Own-price elasticity of demand for x box

Assignment Help Macroeconomics
Reference no: EM1317107

Sherry was just rotated out as Microsoft's X-Box sales manager for the Canadian market. In Canada, the X-Box competes with Nintendo's GameCube. Based upon sales and price data from different cities, Sherry estimated the following demand equation for X-Box in Canada:

QXd = 100,000 - 300 PX + 200 PG

where QXd is annual units of X-Box sold in Canada, PX is the average wholesale price of X-Box in Canada, and PG is the average wholesale price of GameCube in Canada. During the previous year, Nintendo sold 82,300 units of GameCube in Canada at an average wholesale price of $200. In contrast, Microsoft sold 102,500 units of X-Box in Canada during the year under Sherry's leadership.

a. For last year, what is the own-price elasticity of demand for X-Box and what is the cross-price elasticity of demand for X-Box with respect to GameCube?
Annual compensation for sales managers equals 2% of the sales revenue they generate in their region. Taking Sherry's place is Winston. Winston has been in sales for Microsoft for three years and is keen on maximizing his take home pay.

b. Assuming that demand and market conditions remain the same for X-box in Canada, will Winston sell the same number of X-Box units this next year that Sherry did last year? If Winston chooses a different quantity, then how many will he sell and will he be able to claim a larger market share than Sherry did? Will he be able to claim a larger pay-check than Sherry? Given Winston's strategy, what is the own-price elasticity of demand for X-Box and what is the cross-price elasticity of demand for X-Box with respect to GameCube? (You can answer these questions without any knowledge of production costs.)
Assume it costs Microsoft $90 to produce, package, and ship an X-Box unit. A Senior Vice President at Microsoft argues that the compensation formula for sales managers is not best for the company and is stockholders. He points out that if Winston sold X-Box units at a price of $250, Microsoft would realize more profit.

c. Is the Senior Vice President right? At Microsoft, are the goals of maximum market share, maximum revenues, and maximum profit one in the same?

Reference no: EM1317107

Are us markets becoming more or less competitive because

Are U.S. markets becoming more competitive because of new technology? Are U.S. markets becoming more or less competitive because of globalization? Is enough information availa

What makes marketing so much nore attractive

Marketing refers to the four P's in duscussing firm strategties. Why do you think price is the most powerful and important P that the firm has at its disposal What makes it

Amendments using automatic functions

This text is desinged both for those studying on their own and for seminar use. The materiel has been thoroughly tested by the writers. Undertake the following amendments us

Compar the effect of the increase in the cost of material

Starting anew from the equilibrium in part a., suppose that the cost of raw material used in the production of this good increases (assume nothing else has changed). Draw a

How is the american auto industry an oligopoly

How is the american auto industry an oligopoly? 2-3 page paper about this .and how the companies differentiate from one another but yet still initially sell the same products:

Maximum-flow problem and the corresponding minimum cut

Find a maximum matching for the graph in the attachment and use Hall's theorem to prove its optimality. Then, describe the equivalent maximum-flow problem and the correspond

Cost-of-living index for individuals

The price of computers has fallen substantially over the past two decades. Use this drop in price to explain why the Consumer Price Index is likely to overstate substantial

Identifying good alternative solutions

What are the one or two most challenging issues in identifying good alternative solutions that meet the IT acquisition requirements that were defined? Explain your reason(s)

Reviews

Write a Review

 
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd