A medical insurance company offers its salespeople the following compensation scheme: each worker takes a fixed salary and, in addition to that, a commission depending on the volume of sales they generate. At the time, the salespeople are paid 10% of each sale they make that is above €3,500 per day. In order to motivate its salespeople to work harder, the company has decided to alter the commission structure and offer 25% for sales above €5,000. In all cases, the workers have to produce a minimum of €2,500 or else they are fired.
a) Demonstrate both compensation schemes in a graph.
b) Will the new commission structure motive salespeople to work harder, and why?