Eating Skinny is a leading low-calorie microwavable food corporation in the country.
The company has suffered a twenty-percent decrease in their sales due to the limited meal
variations. In order to increase sales, the executives at Eating Skinny are looking at decreasing
the price of their meals. As the Decision Support Analyst for a leading low-calorie
microwavable food corporation, I have been asked by my superiors to estimate the following
demand equation for our products by using data from 26 competitor supermarkets around the
country for the month of April. In order formulate a pricing strategy, we must first find the
elasticity for the independent variables listed below.
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Since the elasticity of the price is inelastic, and consumers are not moved by price change
we cannot assume by reducing the price, we would gain more revenue. If the looking at the
diagram below, one can see that the based on calculation of Total Revenue = Price * Quantity,
we can determine that maximize our revenue at the highest price point per our calculated
By calculating the quantity for the different price points, we are able to see that changes in
demand and total revenue could be impacted by two factors, substitutes and income. Substitutes
are considered a short-term change in demand. Consumers are less likely to buy Eating Skinny
when there is a comparable substitute (competitor) that may be on sale that week. Consumers