1. The following function describes the demand condition for a company that makes caps featuring names of college and professional teams in a variety of sports.
Q = 2,000 - 100P
where Q is cap sales and P is price.
a. How many caps could be sold at #13 each?
b. What should the price be in order for the company to sell 1,000 caps?
c. At what price would cap sales equal zero?
d. Show on graph.

2. The Teenager Company makes and sells skateboards at an average price of $70 each. During the past year, they sold 4,000 of these skateboards. The company believes that the price elasticity for this product is about -2.5.
a. If it decreases the price to $63, what should be the quantity sold?
b. Will revenue increase? Why?
c. Show on graph.

Solution Preview

1. Q = 2,000 - 100P

a) Q = 2,000 - 100(13)
Q = 2,000 - 1300
Q = 700
700 caps could be sold at a price of $13 each cap.

b) 1000 = 2,000 - 100P
100P = 2,000 - 1000
100P = 1,000
P = 10
To sell 1,000 caps, the price would have to be $10 each cap.

c) 0 = 2,000 - 100P
100P = 2,000
P = 20
If the price were $20 each cap, then no sales would be generated.

d) Please see graph attached on the excel ...

Solution Summary

The solution shows how to derive the demand equation, using price elasticity and the inverse slope. Additionally, these formulas can be rearranged to calculate other points of interest. This question also looks at the effect of changing quantity or price on the resulting price or quantity from the demand equation given or derived. Two excel graphs also support both questions.

Decision Making and Calculating Costs for a Warehouse. ... Louis, it should supply the combined demand of 190 ... cities, and the remaining 10 tons demanded at Dayton ...

... So when we're calculating Price Elasticity of Demand we ... in Price) However how we calculate the percentage ... Before when we calculated Price Elasticity of Demand...

... (b) Calculate 3M's gross ... certain the manufacturer makes as many widgets as are demanded Making as many as possible will not necessarily meet demand, and may ...

Calculating price elasticity of demand, profit-maximizing, sketching ... B. Calculate the price/output combination and ... could be performed faster with a calculator. ...

... alpha values into intervals of 0.1 and calculated the optimum ... optimal prices: For each alpha value, calculate the P1 ... is that now we are calculating the P1 ...

... Utility maximizing combinations, calculating market-clearing price. ... 2. Calculate the marginal utility and the ... per dollar spent can be calculated as (Marginal ...

Calculating for Utility and Marginality. ... (Hint: You need to calculate the cost ... of selling price of a decrease of wage can both increase the demand for labour. ...

...Calculate the present value of each of the following future payments. ... If you use the calculator, enter ... is 6 percent ue of a perpetuity is calculated as (Payment ...

... We do this by calculating the cost of the basket using 2006 prices. ... copper ingots and compare it to the opportunity cost we calculated for Chile in ...Calculate. ...

... The equilibrium price and quantity can be calculated by solving ... h. Calculate the dead weight loss (or excess burden ... So the reduction in demand should really be ...