Reference no: EM1374405
1. Assume a company has the following demand equation, Q = 1,000 - 3,000P + 10A, where Q = quantity demanded, P = product price (in dollars), and A = advertising expenditures (in dollars)
Suppose for the questions below that the current P = $3 and A = $2,000
a. Assume the company dropped the price to $2.50. Would this be beneficial? Explain.
b. Assume the company raised the price to $4.00 while increasing the advertising expenditures by $100. Would this be beneficial? Explain.
You have to show how the change in price will affect the total revenue of the company.
Begin by plugging the numbers for the current price and advertising expenditures in the demand equation to find the quantity.
For example, at P = 3, Q = 1,000 - 3,000(3.00) + 10 (2,000) = 12,000 Then, calculate the total revenue. TR = Q x P = 12,000 x $3.00 = $36,000
Use the same procedure to find the total revenue at a price of $2.50 and compare it with the initial total revenue of $36,000.
Obviously, if the total revenue falls at this price, lowering the price is not advantageous. Then, find the total revenue at a price of $4 and advertising expenditures of $2,100.
Another way to solve the problem is to calculate the price elasticity of demand within the price ranges of $3 - $2.50 and $3 - $4. Then, you have to review the relationship between price elasticity of demand and total revenue.
2. The demand and supply functions are given below.
QD = 500 - 2P
QS = -100 + 3P
Graph the supply and demand curves using Excel
Find the equilibrium price and quantity
If the current price of the product is $100, what is the quantity supplied and quantity demanded? How would you describe this situation? What would you expect to happen in this market (will the price go up or down)?
If the current price of the product is $150, what is the quantity supplied and quantity demanded? How would you describe this situation? What would you expect to happen in this market (will the price go up or down)?
Suppose that the demand changes to QD = 600-2P and the supply function stays the same. Graph the new situation in Excel. Find the new equilibrium price and quantity, and show it on your graph.
|
Determine and graph the equations of the tangent lines
: Find the range of angles that trace out the full graph and determine and graph the equations of the tangent lines at each relative maximum of r
|
|
Determine equilibrium price and quantity
: The long run supply curve for a particular type of kitchen knife is horizontal line at a price of dolla three per knife. The demand curve for such a kitchen knife is
|
|
Relationship between policy and effect on unrelated market
: Some states are planning that ethanol be mixed with gasoline to comply with anti pollution laws. Ethanol can be made from corn. Determine what effect are these rules having on the equilibrium price and quantity of corn?
|
|
Discuss the income and consumption relationship
: Discuss and explain the income and consumption relationship make sure to describe marginal propensity to consume. If you received an extra dollar, how much of it would you spend?
|
|
Calculating equilibrium price and quantity
: Assume a company has the following demand equation, Q = 1,000 - 3,000P + 10A, where Q = quantity demanded, P = product value, and A = advertising expenditures
|
|
Analysis effects of non-price factors on demand
: Suppose the demand for computers. For each of the following, state effect on demand, find the equation of the demand curve if consumer incomes are $30,000,
|
|
What is the probability that at least three click on an ad
: If 900 users visited the site, would the probability that more than 250 of them click on an ad be higher or lower than the answer found in part
|
|
Analysis of demand and supply functions
: Demand and supply functions of tomato are listed below, The maximum value of tomatoes that manufacturer will offer for sale if the price of tomatoes is $ 0.30
|
|
Advantage & disadvantage of different types of exchange rate
: During middle years of this decade, the exchange rate of the United States dollar has declined against the currencies of its major trading partners.
|