Long-Term Investment Decisions: Assignment 3

Table of contents:
Table of contents: 1
Introduction: 2
Why would the firm want to decrease the price elasticity of demand? 2
Plan for managers to reduce the price elasticity of their frozen microwavable products: 4
Product differentiation: 4
Branding: 5
Exclusive distributors 5
Predatory pricing 5
Governmental regulations on microwavable food: 6
Is governmental regulation necessary? 6
When is governmental regulation of microwavable food justified? 6
Need for government intervention: 7
Complexities that might arise when expansion takes place Using capital projects: 7
Major complexities that might arise in expansion via capital projects: 8
Possible solutions to reduce these complexities: 9
Conclusion: 9
References: 10
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Introduction:
The managers in the low-calorie frozen microwavable food company are seeking to raise prices in order to increase the revenue and profitability of the firm and this report would guide them on the possible ways to achieve this. There are also major effects of government policies in the food industry on its employment and production and these are being discussed in this report along with the complexities that might arise when expansion is proposed via capital projects. This often created conflicts of interest among various stakeholders which have to be sorted out for efficient expansion.

Why would the firm want to decrease the price elasticity of demand?
The price elasticity of a product is of prime importance for the managers of any firms like the one in the low calorie, frozen microwavable food industry. And this is because when the price elasticity of their products are lower, any increase in price will not reduce the demand as much and hence they can enjoy more revenue and larger profits with the relatively inelastic demand for their products.

IS: Y=C+I+G C= 200+.75(Y-T) I =200-10r T=100 G=100 Y*=1200 LM...