Why does price elasticity of demand change as you move up

Assignment Help Operation Management

Reference no: EM131951684

Individual Project

Assume that you have decided to start your own Internet business to sell cookbooks online (justcookbooks.com). You estimate that the annual cost of this business in the first year will be as follows:

Fixed explicit costs (annually):

Technology (Web design and maintenance) $5,000

Postage and handling $1,000

Miscellaneous $5,000

Equipment $4,000

Overhead $1,000

TOTAL Explicit Fixed Costs (annual) $16,000

Fixed implicit costs (annually):

Lost wages from job given up (annual) $50,000

Variable cost = $20 per book.

Part 1:

Assume that the equation for demand is Q = 40,000 - 500P, where

Q = the number of cookbooks sold per year

P = the retail price of books

Using the information above, fill in the attached chart (note that quantity is just the solution of the demand curve above; the first two lines of the table have been completed for you - you need to complete all other lines in the table):

Indicate the maximum profit price and quantity by highlighting those particular values with red font.

Part 2:

After you complete the chart (either fill in the empty boxes in the table above or create an Excel file), copy and paste the table into a Word file. This table should be at the top of your assignment. Then answer the following questions (based on the chart and your understanding of this material) in 600-800 words:

Why, according to an economist, should implicit costs (i.e., lost wages from job given up) be included in the total cost of your product to compute economic profit?

Why does price elasticity of demand change as you move up the demand curve (more specifically, as the price of the product increases)?

Explain in your own words why MR = MC produces maximum profit for a company.

You may use the following two resources to assist in this assignment as well:

Algebra tutorial website

Excel tutorial website

Unit 4 Discussion Board Simulation Module 3: Forecasting and Contracts

Within the Discussion Board area, write 400-500 words that respond to the following questions with your thoughts, ideas, and comments.

This will be the foundation for future discussions by your classmates. Be substantive and clear, and use examples to reinforce your ideas.

Through improved financial strategies and data management, the supply chain of a company can improve their customer experience, business efficiencies and overall financial performance. By collecting data, improving customer intimacy, establishing financial strategies, and through the use of analytics, organizations can embark on new opportunities and stronger financial futures. Complete the following:

Discuss why it is important for an organization's supply chain to include the management of their data and financial strategies by answering the following questions:

What types of supply chain tools help a company collect data? Please describe two types of tools.

How does supply chain management help a company to improve efficiency and effectiveness?

How does contract bidding improve a company's financial outcome?

Why is forecasting demand important?

Be sure to include your references, and format your submission in APA format.

Reference no: EM131951684

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