Question 1a Assume you have been appointed as the new marketing manager for Ekumfi Fruits and Juices Limited, a producer of Ekumfi Pure Juice in Ghana. The company has the possibility of discriminating between its Local and Foreign markets. To help you determine the prices of the products appropriately in order to maximise profit, you engaged the services of an economist who estimated the demand functions for both Local and Foreign market as: P1 = 120 – 5Q1 Local Market P2 = 200 – 20Q2 Foreign Market where Q1 and Q2 are the respective quantities of Ekumfi Pure Juice demanded in Local and Foreign markets and P1 and P2 are their respective prices (in GH¢). If the Average Cost (AC) of Ekumfi Fruits and Juices Limited for producing Ekumfi Pure Jiuce for these two markets is given as AC = 35/Q + 40, where Q = Q1 + Q2. i. What profit will Ekumfi Fruits and Juices Limited make with and without price discrimination? 10 marks ii. What business advice will you give in respect of practicing price discrimination or selling a uniform price? 1 mark iii. If price discrimination is the option to implement within the context of elasticity of demand, what pricing policy should be implemented in each market to raise total revenue? 4 marks Question 1b Cassava is the main commodity in the economy of Makandingi. Given the hardship in the economy, the government increased the salary of all employees in Makandingi. Following this intervention, the number of cassava producers also increased in the community. In a class discussion, Barnabas said these two events would result in an increase in equilibrium price of cassava. Francis, on the other hand, argued that the price would rather decrease. With the aid of a diagram, explain the possible effects of the two events on equilibrium price and quantity, assuming the salary increase has a greater impact and cassava is a normal good.