Pricing to Competition When ShorTech Introduced Its Quadrant Mobile Phone,it Had Few Competitors

question 36

Essay

Pricing to Competition
When ShorTech introduced its Quadrant mobile phone,it had few competitors and so it set a price of $500 when its unit cost was $350.The economics consulting firm it hired to estimate the demand elasticity confirmed this was the optimal price.Since then,entry has occurred that make customers more price conscious.When it rehired the economics consulting firm to estimate the demand elasticity,it found that demand had become more elastic at -4.Also,it eked out cost savings and now has a unit cost of $300.What price should ShorTech charge now?

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