Explore BrainMass
Share

Explore BrainMass

    Analyzing estimated demand function

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

    The economic analysis division of Mapco Enterprises estimated the demand function for its line of weed trimmers as

    Qd = 18,000 + 0.4N - 350Pm + 90Ps

    where N= number of new homes completed in the primary market area
    Pm = price of Mapco trimmer
    Ps = price of its competitor's Surefire trimmer

    In 2006, 15,000 new homes are expected to be completed in the primary market area. Mapco plans to charge $50 for its trimmer. The Surefire trimmer is expected to sell for $55.

    a) What sales are forecast for 2006 under these conditions?
    b) If its competitor cuts the price of the Surefire trimmer to $50, what effect will it have on Mapco's sales?
    c) What effect would a 30-percent reduction in the number of new homes completed have on Mapco's sales (ignore the impact of the price cut of the Surefire trimmer)?

    © BrainMass Inc. brainmass.com October 10, 2019, 2:10 am ad1c9bdddf
    https://brainmass.com/economics/microeconomics/analyzing-estimated-demand-function-366191

    Solution Preview

    a) What sales are forecast for 2006 under these conditions?

    Qd = 18,000 + 0.4N - 350Pm + 90Ps
    Put N=15000, Pm=$50 and Ps=$55
    Qd=18000+0.4*15000-350*50+90*55=11450

    b) If its competitor cuts ...

    Solution Summary

    Solution analyzes the impact of changing values of various parameters on estimated sales.

    $2.19