1. Estimate the effect on income of each of the options Flores has suggested if Wu estimates as follows:
Increasing the price to commercial customers to $1,000 per hour would reduce demand by 30%.
Reducing the price to commercial customers to $600 per hour would increase demand by 30%.
Increased promotion would increase revenue hours by up to 30%. Wu is unsure how much promotion this would take. (How much could be spent and still leave Salem Data Services with no reported loss each month if commercial hours were increased 30%?)
2. Based on your analysis above, is Salem Data Services really a problem to Salem Telephone Company? What should Flores do about Salem Data Services?