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Chapter 5 HMWK

This is one of the most practical chapters you ever read in an economics text. Many years ago when I was an economist for GTE (now Verizon) we spent significant amounts of time estimating cross-price elasticities as the basic decision-making tool for package design --deciding whether or not to package call-waiting or caller ID with other phone features for example.  Including features consumers really want with other, not-so-popular features in a package can increase sales of all features.
Give an example of sales based on price elasticities that you have seen or used.  Why do you think it worked (or didn't work)?  What would you change to make it a more effective sales promotion? How did the theory from class influence your response?
What topic in this chapter was the most useful? What topic would you like to spend more time on? Why?




I was involved in retail merchandising for a time, and I remember talking about grouping really cheap eye-catching sale items with more expensive items that are related. The goal was to increase each customer's basket, so even though the sale item had a very low profit margin, overall it helped move other items into the shopping basket.

I was intrigued by the illustration in this chapter about improvements in efficiency for farming may reduce revenue for farmers if they all take advantage of it at once and flood the market with product.

It was also interesting to note that a drug user's desire is inelastic, and that reducing the supply available to buy would increase the price and could increase crime when addicts are looking for quick cash.

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