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Applied Economics: Cost-Benefit Analysis

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 - 100 P; where Q is cap sales and P is price.

a)How many caps could be sold at $12 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?

3) 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 believe that the price elasticity for this product is about
-2.5.If it decreases the price to $63, what should be the quantity sold? Will revenue increase? Why?


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