Abstract Determining price levels and pricing policy affects revenues and consumer demand and thus remains one of the most important elements in determining profitability and market share. Part of the pricing process involves the anticipation of competitive reactions to price changes and its economic effects on supply and demand. This paper examines the effect of a price reduction strategy on product X given a hypothetical business situation. The paper discusses the business situation and provides …showed first 75 words of 1322 total…

…showed last 75 words of 1322 total…cost, marginal revenue, and average total cost and their combined affect on profitability. In conclusion, product management concurs with marketing's proposal to reduce prices. However, product management also suggests that accounting conduct and report additional marginal cost and marginal revenue analysis in order to properly identify profit maximization. Resources Cheng, W. (2002). Week 4 Class Lecture. Economics for Managerial Decision Making. University of Phoenix, Online. Lieberman, M, et al. (2001). Introduction to Economics. Cincinnati, Ohio, South-Western College Publishing.