Explore BrainMass
Share

Explore BrainMass

    Demand elasticity and scale on scope economics

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    1 George has been selling 5,000 T -shirts per month for $8.50. When he increased the price to $9.50, he sold only 4,000 T- shirts. What is the demand elasticity? If his marginal cost is $4.00 per shirts, what is the desired markup and what is his initial actual markup? Was raising the price profitable?

    2 The variety of Riverside Ranger logo T -shirts includes 12 different designs. Setup between designs takes one hour (and $18,000), and after setting up, you can produce 1,000 units of a particular design per hour (at a cost $8,000). Does this production exhibit scale economies or scope economies.

    3 Why might intangible resources like human capital and intellectual assets be a more likely source of sustainable competitive advantage than tangible resources?

    © BrainMass Inc. brainmass.com October 10, 2019, 6:20 am ad1c9bdddf
    https://brainmass.com/economics/elasticity/demand-elasticity-scale-scope-economics-540431

    Solution Preview

    1. George has been selling 5,000 T -shirts per month for $8.50. When he increased the price to $9.50, he sold only 4,000 T- shirts.
    a. What is the demand elasticity?
    Level 1 Level 2 % Change
    Quantity 5,000 4,000 -20%
    Price $8.5 $9.5 12%
    Price Elasticity of demand (1.7) =(-20%/12%) * 100%

    b. If his marginal cost is $4.00 per shirts, what is the desired markup and what is his initial actual markup?
    Marginal cost $4.0
    Selling price $8.5
    Desired Mark-up 112.5% =($8.5 - $4.0)/$4.0

    c. Was raising the price profitable?
    Level 1 Level 2 Change
    Price $8.5 $9.5 ...

    Solution Summary

    Demand elasticity and sales on scope economics are examined. Why intangible resources like human capital and intellectual assets are determined.

    $2.19