Sailright Inc. manufactures and sells sailboards. Management believes that the price elasticity of demand is -3.0. Currently, boards are priced at $500 and the quantity demanded is 10,000 per year.

A. If the price is increased to $600, how many sailboards will the company be able to sell each year?

B. The cross-price elasticity of demand between Sailright and its closest competitor is +2.25 and income elasticity of demand is +1.5. If income increases by 5% and its competitor reduces its prices by 10%, how much would Sailright have to change its prices to keep its total sales unchanged? Assume that price elasticity of demand is still -3.0.

Solution Preview

A. If the price is increased to $600, how many sailboards will the company be able to sell each year?

I will use mid point formula for my calculations.

Change in prices=(600-500)/((600+500)/2)= 0.181818
Let new sales be Q
Change in sales=(Q-10000)/((Q+10000)/2)
Change in sales=Price elasticity of demand*change in ...

Solution Summary

Solution calculates the change in output in response to the given variations.

Calculating the Equilibrium Output Level. ... due to change in taxes)=-16.67 Net change in equilibrium ... level of output=2400+50= 2450 e) Calculate the equilibrium ...

... find that Marginal Cost does not change with the change in fixed ... Solution describes the steps to calculate optimal output level and profit associated ...

... describes the steps and formulas for calculating maginal product ... b. Calculate the average product of labor. ... of =(Change in s workers output/Change 250.0 in no. ...

...Calculate the magnitude of the exogenous change in aggregate demand that is ... Be clear about the form of the multiplier and why it changes. See attached. ...

...Calculates the growth, price-recovery, and productivity ... To calculate productivity changes in dollar terms Dollar amount= % change in productivity X New ...

... I have mentioned the formula for calculating these costs. ... How to Understand and Calculate Cost Measures. ... The Marginal Costs can be calculated by dividing the ...

... question b) changed if the price changed to $41? ... The solution describes the steps to calculate AFC, ATC ... It also calculates economic profits at the given market ...

... It also calculates associated profit with optimal output level ... the table in exercise A to calculate marginal revenue ... Marginal Cost=change in TC/Change in output...

... This post shows how to calculate changes in untouchable package service and change in the ... A. Calculate the change in UPS's weekly breakeven output...