How the price increase apparently led to a reduction

Reference no: EM13233667

Recently, Pacific Cellular ran a pricing trial in order to estimate the elasticity of demand for its services. The manager selected three states that were representative of its entire service area and increased prices by 5% to customers in those areas. One week later, the number of customers enrolled in Pacific's cellular plan declined 4% in those states, while enrolments in states where prices were not increased remained flat. The manager used this information to estimate the own-price elasticity of demand and, based on her findings, immediately increased prices in all market areas by 5% in an attempt to boost the company's 2007 annual revenues. One year later, the manager was perplexed because Pacific Cellular's 2007 annual revenues
were 10% lower than those in 2006 - the price increase apparently led to a reduction in the company's revenues. Did the manager make an error?

Reference no: EM13233667

Questions Cloud

What is the expected number of floors the elevator stops : A building has n floors numbered 1, 2, . . . , n, plus a ground floor G.

How does a procurement department support a manufacturing : How does a Procurement Department support a Manufacturing Assembly Floor How does a Procurement Department ensure the success of a Manufacturing Assembly Floor

Explain sodium hydroxide and determine the volume of base : For the titration of 25.0 mL of 0.20 M hydrofluoric acid with 0.20 M sodium hydroxide, determine the volume of base added when pH is 2.85

What is personal professional strategy to remain competitive : What is your personal professional strategy to remain competitive in this environment as globalization increases?

How the price increase apparently led to a reduction : Recently, Pacific Cellular ran a pricing trial in order to estimate the elasticity of demand for its services. The manager selected three states that were representative of its entire service area and increased prices by 5% to customers in those a..

How can the hrm professional be prepared to deal : How can the HRM professional be prepared to deal with the variations in HR practices in the global environment.

Write a paper on electronic health record : Write a paper on Electronic Health Record (EHR) Research and Summary.

What law applies to this agreement : What law applies to this agreement? Provide a step-by-step analysis leading to your conclusion and is there a contract under the applicable law? Provide citations to the relevant authority in support of your answer.

Analyze a best practice human capital acquisition : Identify and analyze a best practice human capital acquisition, development, and retention in the United Kingdom.

User Account

All Pages