Presume as a manager of a profitable department store you are confronted with a pricing problem. You have two types of consumers: a high-end type that are willing to pay a price of $20 for a pair of Levis Jeans, and a low-end type consumer that are willing to pay a price of $13 for the same pair of jeans. Your supplier provided you with the jeans at MC of $11 per jeans. Your survey of your customers for jeans tells you that 50 percent of your consumers are of the high end type and 50 percent are of the low end type.
a) If you decided to price high, what would be your expected profits per unit.
b) If you decided to price low, what would be your expected profits per unit.
c) Presume your store attracts 1000 consumers for these jeans: will you price high or low? Describe briefly.