Market analysts for a large cereal company estimated that price elasticity of demand for pre-sweetened cereal is 1.97,but that the entire market for ready-to-eat cereals exhibits price elasticity of demand of 0.36.Most likely,this information will be collected by managers in which step of the price-setting process?
A)identifying pricing constraints and objectives
B)estimating the break-even point
C)estimating demand and revenue
D)selecting an appropriate (approximate) price level

Question

Quizplus · Accepted Answer

The information about price elasticity of demand for pre-sweetened cereal and the entire market for ready-to-eat cereals is related to estimating demand and revenue. This information will help managers understand how a change in price will affect demand for both their product and the entire market, which is important in setting an optimal price to maximize revenue. Therefore, the best choice for the step of the price-setting process where this information is likely to be collected is C, estimating demand and revenue.

Market Analysts for a Large Cereal Company Estimated That Price