Existing Good or Service Business Proposal

Existing Good or Service Business Proposal
July 4, 2011

Existing Good or Service Business Proposal
      This paper is based on Will Bury’s new product.   The product will transform the printed word into audio, “read” aloud by a realistic synthetic voice. The paper will speak of profit-maximizing and increasing revenue. Marginal cost, marginal revenue, credit markets, and the unemployment rate are briefly covered.   Additional sections will discuss pricing and non-pricing strategy, barriers to entry, product differentiation, and minimizing cost.
Profit-Maximizing and Increasing Revenue
      Profit-maximizing quantity is figured by determining if the product is considered price-elastic or in-elastic. If demand is elastic, a decrease in price will increase total revenue.   Conversely, a price increase will decrease total revenue for a product that has in-elastic demand. Bury can create a revenue curve graph as additional sales at various prices create additional data.   Bury must determine the optimal price using the formula “MC = MR” (marginal cost equals marginal revenue).
Marginal Cost and Marginal Revenue
      “Marginal revenue is the increase in revenue from selling one more unit of a product” (Pietersz, 2011).   “The marginal cost of an additional unit of output is the cost of the additional inputs needed to produce that output” (EconModel.com, 2011).   The marginal cost of each unit is the difference in ATC per unit. (As an easy example: If the first 100 units cost $1000 and the 101st unit cost an additional $15, the marginal cost of the 101st unit is $15).
Pricing and Non-Pricing Strategies
      Bury must find the price for his product that will prevent a substitution effect. Bury’s research has determined that a 500-page book on CD costs roughly $20. Bury’s initial price will certainly not be above this $20 level. His decision to price “newer” books, those that include a royalty fee, at $15 may be the proper initial price. Bury’s price for...