There Are Two Types of Consumers of High Definition Television

question 38

Essay

There are two types of consumers of High Definition Television (HDTV) sets. The first type of consumer is highly eager to purchase the sets. Their demand is The resulting marginal revenue function is After the first month the HDTV sets are on the market, the first-type demand goes to zero at any price. The second type of consumer is more sensitive to price and will be the same one month after the sets are on the market. Their demand is The resulting marginal revenue function is Suppose that the marginal cost of producing HDTV sets are constant at $200. What pricing strategies might the manufacturer of HDTV sets consider to maximize profits?

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Definitions:

Consumer Surplus

The gap between what consumers are prepared to pay for a good or service and what they actually do pay.

Binding Price Floor

A minimum price set by the government for certain goods and services that is above the equilibrium price, causing a surplus.

Unwanted Surplus

An excess of goods that exceeds consumer demand, leading to unsold stock and potential waste.

Inefficiencies

Refers to situations where resources are not used in the most effective way, leading to waste or lost potential benefit.