Calculating Quantity Demanded and Determining Demand Curve
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Gurgling Springs, Inc., is a bottler of natural spring, Inc. is a bottler of natural springs water distributed throughout the New England states. Five-gallon containers of GSI spring water are regionally promoted and distributed through grocery chains. Operating experience during the past year suggests the following demand function for its spring water.
Q = 250 - 100P + 0.0001Pop + 0.0031 + 0.003A
Where Q is quantity in thousands of five-gallon containers, P is price ($), Popis population, I is disposable income per capita ($), and A is advertising expenditures ($).
A. Determine the demand curve faced by CPI in a typical market where P=$4, Pop=4,000,000 persons, I=$50,000 and A=$400,000. Show the demand curve with quantity expressed as a function of price, and price expressed as function of quantity.
B. Calculate the quantity demanded at prices of $5, $4 and $3.
C. Calculate the prices necessary to sell 1,250, 1,500 and 1,750 thousands of five gallon containers.
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Solution Summary
Quantity demanded is assessed and the calculation process is explained in an excel attachment with graphs.
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Q = 250 - 100P + 0.0001Pop + 0.003I + 0.003A
If you plug the known factors into the equation, you can find the quantity demanded in the typical market.
Q = 250 - 100(4) + 0.0001(4,000,000) + 0.003(50,000) + 0.003(400,000) = 1600
Q = 1600 thousand five-gallon containers.
To simplify this equation for varying price, we can simply combine all the factors except ...
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