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.

... a) Calculate the expenditure schedule, and find the equilibrium ... Confirm your answer to e) by calculating the new ... see how each value was calculated, click the ...

... If we take aliquots of water samples and test them through titration with manganese sulfate, how do we calculate he biochemical oxygen demand of the system? ...

... Solution describes the steps to calculate equilibrium price and quantity in the ... For determining equilibrium price, put Q (demand)=Q(supply) 100-5P=20P 100 ...

...Calculate your price elasticity of demand of apples. ... about.com, The Price Elasticity of Demand measures the rate of response of quantity demanded due to a ...

... Q=2000 - 100(4) = 1600 Q=2000 - 100(3) = 1700 C. Calculate the prices ... THIS IS CALCULATED BELOW. TO GET A DEMAND FUNCTION YOU NEED BOTH (P) AND (Q) IN VARIABLE ...

... Total cost $6,653.94. This post shows how to calculate EOQ, lead time demand information, calculate the safety stock based on SL and reorder point. ...

... have z value = 2.33 Safety stock = Z*standard deviation of demand for 4 ... Solution describes the steps to calculate optimal order size, minimum inventory cost ...

... at Scenario #6 levels, and then calculate demand at each ... at Scenario #6 levels, and then calculate supply at ... values in cells G6-G15 to be calculated with all ...

... of the above....how do I calculate how much ... "Calculating quantity of nitrogen in urea --- for an environmental ... stated BOD or bio-chemical oxygen demand in that ...