A finished DBA-815 Topic 2 own-price elasticity analysis example, separating market from firm-level elasticity and using the markup rule to show a cited figure cannot describe the chain's own demand. Searches like "dba 815 topic 2 assignment example", "dba815 topic 2 sample" and "dba-815 topic 2 example" land here.
What a finished DBA-815 Topic 2 own-price elasticity analysis looks like
The consultant's arithmetic is reproduced first and found internally correct: at -0.4, a 10 percent rise loses about 4 percent of members and revenue climbs. The analysis then asks what the -0.4 measures. The report estimated it for gym membership as a whole, which is category demand, while the chain's question is whether its own members stay when a nearby club charges less. Own-price elasticity for one seller exceeds category elasticity whenever buyers can switch. A consistency check follows. With marginal cost near $12 per member-month and dues at $49, figures illustrative, the markup rule says a profit-seeking chain already pricing well faces an own elasticity near -1.3. An own elasticity of -0.4 would call for a markup above 100 percent, which no price can produce. At -1.3, the proposed rise lowers monthly contribution by roughly 2 percent.
How a DBA-815 Topic 2 example is structured
The analysis moves from the consultant's number to the chain's own demand in six steps. It opens by restating the proposal and reproducing its arithmetic, so the error is located in the input rather than the calculation. A definitions section separates three elasticities the report blurs: category demand for gym membership, the chain's own-price elasticity, and the cross-price elasticity between the chain and each type of rival. The consistency check comes next, setting out the markup rule, the chain's current margin and the elasticity that margin implies. That implied figure is then used to rerun the proposal, showing contribution falling slightly where the report showed revenue rising. A section on what differs by club explains why the chain-wide number may hide clubs where demand is less responsive. The close concedes that the implied figure is an inference, not an estimate, and names the evidence that would replace it.
The consultant's arithmetic checked first
On its own terms the report's revenue gain holds, which moves the question from its calculation to the elasticity it borrowed.
Category demand is not the chain's demand
Whether people join a gym at all responds weakly to price, while whether they join this chain rather than a nearby rival responds far more.
What the current margin implies
Dues of $49 against a $12 marginal cost imply an own elasticity near -1.3 for a chain pricing close to its profit-maximizing level.
An impossible markup exposes the figure
Taken as the chain's own elasticity, -0.4 would require a markup above 100 percent of price, which shows the number was measured for something else.
The proposal rerun at -1.3
Members fall about 13 percent at $54, and monthly contribution drops roughly 2 percent, the reverse of the revenue gain the report promised.
An inference awaiting an estimate
The implied -1.3 assumes the current price is already near optimal, so the analysis closes by naming the test that would measure elasticity directly.
Where marks go in DBA-815 Topic 2
Borrowing an industry elasticity for a single firm's price costs the most here, and a paper that accepts the consultant's -0.4 has misread elasticity at exactly the level where it decides the answer. Papers that recompute the report's revenue gain without asking what the figure measures check the arithmetic and miss the input. Revenue is the wrong target in any case, since a rise that lifts revenue can still lower contribution once marginal cost is counted. The markup consistency check is often absent, although it is the quickest route from the chain's own margin to a plausible elasticity. Some analyses correctly reject the figure and then offer no alternative, which leaves the executives with a veto and no number. Treating the implied -1.3 as measured rather than inferred overstates what the check can show.
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Send the DBA-815 Topic 2 instructions, the rubric for your section and any demand data, report or pricing proposal the case supplies. We write a custom example to them, with the cited elasticity traced to what it measures, market and firm demand separated, the markup check run and the proposal recomputed on contribution, in 24 to 48 hours. The first one is free.
DBA-815 Topic 2 questions, answered
What is the markup rule?
For a firm with some pricing power that sets price to maximize profit, the gap between price and marginal cost, as a share of price, equals one over the absolute value of its own-price elasticity. Economists know the left side as the Lerner index. Because that share cannot exceed one, a profit-maximizing firm never prices where its own demand is inelastic, which is why the example can reject -0.4 as the chain's figure.
Why is a single chain's demand more elastic than the market's?
Because buyers leaving one chain rarely leave the market. When one club raises its price, many members move to a nearby rival rather than giving up exercise, so the chain loses far more members than the industry does. Market elasticity measures the second loss and firm elasticity the first. A pricing decision by one seller depends on the first, and borrowing the second is a common misreading on this topic.
Does this mean the chain should never raise its price?
No. The implied elasticity is a chain-wide average, and clubs with no nearby rival may face much less responsive demand than clubs beside a competitor. A rise could pay in some locations and lose in others. The example argues only that the consultant's evidence cannot support a chain-wide increase, and that a firm-level estimate, ideally split by competitive setting, should come before any price moves.