Purchase Solution

# Demand elasticity and scale on scope economics

Not what you're looking for?

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?

##### 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!!"

##### 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.