Latoya was looking at opening a container business, manufacturing and selling plastic storage
containers for industrial use. As a first step towards starting the business Latoya did research
into the cost of making the containers and how much of a need these containers were in the
market place. Everything seemed to be lining up and Latoya was ready to determine a price for
her product and so did some market research with her likely customers to see what they would
be willing to pay comparing cost with how many customers said they would be willing to pay
that price for the container, the data is in the following table.
container 20 25 30 35 40 45 50 55
% of
customers
polled
95%
86%
79%
79%
68%
54%
40%
27%
willing to
pay that
price
Latoya also knew that $20 was the least she could charge for these containers and still break
even, and so in discussing these possible prices with her allies in business (and computer
simulations she ran) she determined a confidence level (in percentage) of how effective each
price would be for making a profit, that data is below in the table.
Cost of
20
25
30
35
40
45
50
55
Container
($)
Confidence 4%
20%
32%
46%
56%
70%
82%
95%
level in
making
profit (%)
Based on these tables, what price point should Latoya set on her containers as she starts the
business? Make sure that your answer is backed by rationale that includes mathematical
evidence for that choice.