Monsanto's Roundup

How do you know that slicing price of Roundup was a good idea to get Monsanto?

One of the factors intended for Roundup's accomplishment is because of the increasing demand for conservation tillage. But as the conservation tillage is very sensitive to the value of herbicides, the price of herbicides is very stretchy. Therefore , the necessity for herbicide will reply substantially to changes in the cost. For Roundup, when their price was reduced by 9%, the sales quantity was improved by 22%. 22% is significantly higher than 9%. As a result, the cost of Roundup is extremely elastic and the cutting value of Roundup will increase a lot more sales volume. In addition , Monsanto can exploit economies of scale, the cost will not be quite high. As the percentage increased of sales volume is much higher than the percentage reduced of cost, its earnings were also improved a lot. Therefore, cutting the price tag on Roundup was a good idea for Monsanto.

So how does15404 you estimate the suppleness of demand and the profit-maximization price pertaining to 1995. Do you think Monsanto established the right cost?

To estimation the firmness of demand, the percentage difference in quantity demanded in response towards the percentage change in price needed to be calculated. e=(% change in volume demended)/(% enhancements made on price)

Relating to Demonstrates 1 and 2, the domestic and international prices and amounts of Roundup in 1995 and 1996 are listed below:

19951996

Home Price\$45\$44

Intercontinental Price\$21\$20

Domestic Volume13M15M

Foreign Volume25M30M

The domestic elasticity of demand is (|15-13|/((15+13)/2))/(|44-45|/((45+44)/2))=6. 36 The international elasticity of demand is (|30-25|/((30+25)/2))/(|20-21|/((20+21)/2))=3. 72 To estimate the profit-maximization selling price, the minor cost must be equal to the marginal earnings. When (p-MC)/p=1/|e|, the profits happen to be maximized. But since the limited cost had not been mentioned in the case, the profit-maximization price cannot be calculated. Nevertheless , between...