Purchase Solution

Demand elasticity and scale on scope economics

Not what you're looking for?

Ask Custom Question

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?

Purchase this Solution

Solution Summary

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

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 provided by:
Education
  • B. Sc., University of Nigeria
  • M. Sc., London South Bank University
Recent Feedback
  • "Thank you."
  • "thank you Chidi Ngene.. if you have any APA references would be great"
  • "Thank you so much for your help, your explanations were easy to understand and apply!"
  • "are you able to highlight the equations used either on the xlsx or a word doc as to how each graph was formed- overall looks fine i just need help understanding this myself"
  • "Chidi Ngene, M. Sc. Was extremely helpful as without the help and guidance I would have failed, but with the help I passed. I still have a lot to learn and in need of the guidance to understand and learn more on the subject. I would recommend Chidi Ngene and BrainMass to anyone that are in need of help. Thank you!!"
Purchase this Solution


Free BrainMass Quizzes
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.

Basics of Economics

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

Pricing Strategies

Discussion about various pricing techniques of profit-seeking firms.

Elementary Microeconomics

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