Problem 1: A local pet store which has concentrated on selling puppies, is considering adding a line of pet food. A contractor estimates that is will cost $10,000 to convert some storage space into a retail area for the food. The store will purchase the specialty food for $15 and sell it for $30. Marketing research indicates that the store will sell 900 bags. Should the store add the pet food to its products and why?
Problem 2: Assume that the store decided to add the pet food line. Two months after it began selling the food, its pet food sales declined dramatically because a competitor across the street started selling the identical food for $22 per bag. Should the store match the price offered by the competitor? Why?