Business, 06.05.2020 04:23 geraldsmith2008

EBike, an electronic bicycle manufacturer, has identified two customer segments, one is willing to pay a higher price for a customized bicycle and the other one is more price sensitive and is willing to pay for standard bicycles. Demand curve for the customers willing to pay for customized bicycles is d1 = 11,000 - 25p1. Demand curve for the more price sensitive customers is d2 = 11,000 - 45p2. Assume production cost for each bicycle (standard and customized) is c = $160 per unit.

1. What price should eBike charge each segment if its goal is to maximize profits?
2. If eBike was to charge a single price over both segments, what should it be? How much increase in profits does differential pricing provide?
3. If total production capacity is limited to 5,000 units, what should eBike charge each segment?

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