Reference no: EM131244650
Office Enterprises (OE) produces a line of metal office file cabinets. The company’s economist, having investigated a large number of past data, has established the following equation of demand for these cabinets:
Q = 10,000 + 60B – 100P + 50C where
Q = Annual number of cabinets sold
B = Index of nonresidential construction
P = Average price per cabinet charged by OE
C = Average price per cabinet charged by OE’s closest competitor
It is expected that next year’s nonresidential construction index will stand at 160, OE’s average price will be $40, and the competitor’s average price will be $35.
Forecast annual sales. Enter your response as a whole number without the dollar sign.
What will be the new sales forecast if the competitor lowers its price to $32?
What will be the new sales forecast if OE reacts to the decrease mentioned in the previous question by lowering its price to $37? (The competitor’s price will now be $32 and the firm’s own price will be $37.)
If the index forecast was wrong, and it turns out to be only 140 next year, what will be OE’s projected sales assuming the original price information of P = $40 and C = $35? Enter your answer as whole numbers.
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