Question

Your team is managing a fundraiser that will offer chocolate tasting at an event. The chocolate is being donated and thus has no cost to you. Your goal is to maximize the revenue you receive from selling the chocolate.

You know that there are two types of people at your event. Chocolate lovers and chocolate likers. There are 10 chocolate lovers and 20 chocolate likers. However, you cannot tell what type any given person is.

• A chocolate lover would be willing to pay $7 for the first chocolate, $5 for the second, $2 for the third, and $1 for fourth.
• A chocolate liker is willing to pay $5 for the first chocolate, $3 for the second, $2 for the third and $0 for a fourth.
• No one is willing to pay anything for a fifth.

Explain how you will price the chocolate. How much will consumers buy? What will be the total revenue you will collect?

Answer 1

Price($)	Demand of lovers	Demand of likers	Total Demand	Total Revenue
7	1×10=10	0	10	70
6	1×10=10	0	10	60
5	2×10=20	1×20=20	40	200
4	2×10=20	1×20=20	40	160
3	2×10=20	2×20=40	60	180
2	3×10=30	3×20=60	90	180

To calculate the different price and Revenue combination we formed the table all the values in revenue column is in $ .

So what we observe that the revenue is maximum when the price is $5.

The explanation is that when the price is $5 the lovers will consume 2 chocolates each and the likers will consume one chocolate each. So the total amount of chocolate consumed is 40. And. The revenue gained is $200. It is the maximum.

We ignored the price $1 because it is unrealistic and we can illustrat the other rows of the column just like we did in the previous paragraph for price equal to $5.

Please leave a feedback if possible. Thank you.!!