If consumers have inelastic

demand preferences, then a price

change (increase or decrease) is
not profit-maximizing given the
inclusion of incremental fixed costs
(i.e., marketing campaign)

Data gap since baseline

(0%) does not included Decreasing price in this “z
incremental fixed costs would lead to greater profi
for PDC if the price elastic
demand is greater than ~2

05,000 115,000 125,000 135,000 145,000 155,000 165,000

Baseline sales volume of 130,000

units at a unit price of $2,000

The gray line represents the

break-even sales curve without
incremental fixed costs; the black
line (to the right) with the additional
$10M in fixed spend
 BE with IFC Elasticity 2.66

Data gap since baseline

(0%) does not included
incremental fixed costs

20,000 145,000 170,000 195,000 220,000 245,000 270,000

sales volume
00 units at a
e of $2,000

PDQ profitability
increases above
baseline levels when the Price
price per unit falls at rang
least 4% base
 PDQ Total profits as a function of price and elasticity of demand
2.9 2.66 2.4
to decline at steeper
e to lower contribution

Millions
fixed costs 70

50
Total profit becom
30 at price increase
~10%
10

-50% -40% -30% -20% -10% -10 0% 10% 20%

-30
Profit maximizing prices:
- Ed = 2.9; optimal price = -25%
- Ed = 2.66; optimal price = -23% -50
- Ed = 2.4; optimal price = -21%
-70

-90
% Change in baseline price
 BE with no IFC BE with IFC Elasticity 2.9 Elasticity 2.66 Elasticity 2.4

Data gap since baseline

(0%) does not included
incremental fixed costs

20,000 145,000 170,000 195,000 220,000 245,000 270,000

sales volume Decreasing price in this “zon

00 units at a would lead to greater profita
e of $2,000 for PDC if the price elasticit
demand is greater than ~2

gray line represents the Price

ak-even sales curve without rang
emental fixed costs; the black base
(to the right) with the additional
M in fixed spend
 BE with no IFC BE with IFC Elasticity 3.2 Elasticity 2.2 Elasticity 2.66 Elas

Represents the “band” o

customer elasticities of d
(short-term, approximate
demand curve)

105,000 115,000 125,000 135,000 145,000 155,000 165,000

 Data gap since baseline
(0%) does not included
incremental fixed costs

05,000 115,000 125,000 135,000 145,000 155,000 165,000

Baseline sales volume of 130,000

units at a unit price of $2,000
PDQ profitability
increases above
baseline levels when the
price per unit falls at
least 4%