Matrix Systems Assignment | Homework For You
The primary product of Matrix Systems Inc (MS hereafter) is manufactured from a number of components and sold to customers in a specialized market niche. Production costs for the product are heavily dependent upon the price of one of the product’s components, call it circuit board A. For well over a year profits at MS have been severely depressed due to the high price of circuit board A.
As of January of this year the price of this circuit board has plummeted due to a dramatic increase in supply from a start-up which has entered the market. The question at hand is whether the price of the product should be changed due to the change in price of this circuit board.
The majority of the marketing group argues that the optimal pricing strategy is to leave price as is and reap the windfall profits which are now beginning to accrue. (Of course, if competition appears on the horizon, then prices would be lowered to defend MS’s market.) A minority of the marketing group wants to lower price immediately, independent of competition or the threat of it, because “costs are lower” and hence “we’ll make even more money if we lower price.” Assuming that Matrix’s goal is profit maximization, and being as specific as possible evaluate these recommendations on the basis of their profitability. Use graphs or figures to help explain your reasoning. Get Economics homework help today