Purchase Solution

Revenue/Equilibrium Price

Not what you're looking for?

Ask Custom Question

A) Suppose you are an economic consultant for a large company that produces and sells lollipops that are shaped like the faces of Hollywood celebrities. The company has shops in the major cities around the country and also sells by mail order catalog. As an economic consultant, you have estimated the elasticity of demand for store-bought lollipops to be 0.75 and the elasticity of demand for mail order lollipops to be 3.
1. What advice would you give to the president of the company if she wanted to increase revenue from the shops?
2. What advice would you give to the president of the company if she wanted to increase revenue through mail orders?

B) LATER, suppose that the price of sugar increases causing a 20% reduction in the supply of celebrity lollipops. What information would you need to compute the effect of the reduction in supply on the equilibrium price?

Purchase this Solution
Solution Summary

The solution answers the questions below related to economics

Solution Preview

Answer (A):
Elasticity of Demand for store-bought lollipops: 0.75 (Ineleastic)
Elasticity of Demand for Mail order lollipops: 3 (Elastic)

If the president wants to increase revenue from the shops, then he should increase the price of lollipops. This is because the demand is ...

Purchase this Solution
Free BrainMass Quizzes
Basics of Economics

Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.

Elementary Microeconomics

This quiz reviews the basic concept of supply and demand analysis.

Economics, Basic Concepts, Demand-Supply-Equilibrium

The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.

Economic Issues and Concepts

This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.

Pricing Strategies

Discussion about various pricing techniques of profit-seeking firms.

View More Free Quizzes
Related BrainMass Solutions

  • Calculating equilibrium price and quantity

    Determine the equilibrium price and quantity and illustrate with a graph. b. The government imposes a tax of $5.00. Find the new equilibrium price and quantity. c. Determine the total tax revenue earned by the government.

  • Total Revenue with Perfect Price Discrimination

    Technically, total revenue by perfect price discrimination is the area of the triangle below the demand curve above the equilibrium price.

  • Deadweight Loss and Taxation

    (a) Solve for the equilibrium price and the equilibrium quantity. Equilibrium occurs when QS= QD. Setting the given equations equal to each other, we find: 2P=300-P 3P = 300 P=100 So equilibrium price is 100.

  • Tax revenue

    What is total tax revenue collected after the tax is implemented. a) Before tax, equilibrium price = $6 and quanitity = 200 units After tax, equilibrium price = $8 and quantity = 100 units.

  • Finding consumer surplus and Govt's revenue

    Equilibrium quantity=1 Government revenue=Equilibrium quantity*per unit tax=1*6=$6 There are two problems. Solution to first problem explains the steps to find out consumer surplus at given price levels.

  • Finding Equilibrium Price and Quantity for monopolist

    In equilibrium MC = MR 1.5Q = 30-0.5Q Q =15 P=(120-15)/4 = 115/4 =28.75 The solution describes the steps for finding Marginal Revenue function, equilibrium quantity and price for a monopolist in a given case.

  • Price Shift Results in Demand

    a. a price ceiling, excess demand b. a price ceiling, excess supply c. a price floor, excess demand d. a price floor, excess supply e. an equilibrium price, equilibrium output 3.

  • Cournot Duopoly: Determining Equilibrium Price and Quantity

    Total Output Q=q1+q2 P = equilibrium price P=100-2*(q1+q2) = 100-2q1-2q2 Consider Firm A Total Revenue for Firm A, TRA TRA=P*q1 TRA=(100-2q1-2q2)*q1=100q1-2q1^2-2q1q2 Marginal Revenue for Firm A, MRA MRA=dTRA/dq1=100-4q1-2q2 Cost

  • Description of Equilibrium Price and Quantity

    This will happen because at that price the total profit [Total Revenue - Total Cost ] is maximized If Country A and Country B formed a cartel, What would be the equilibrium price and quantity? Why? Is this cartel likely to survive? 

  • Finding optimal output level

    a.At what output rate and price does the monopolist operate? b.In equilibrium, approximately what is the firm's total cost and total revenue? c.What is the firm's economic profit or loss in equilibrium?

View More Related Solutions