4. An economic consultant for X Corp. recently provided the firm's marketing manager with this estimate of the demand function for the firm's product: Q = 12,000 – 3P, + 4P,– 1M + 2A, %3D where Qxd represents the amount consumed of good X, Px is the price of good X, Py is the price of good Y, M is income, and Ax represents the amount of advertising spent on good X. Suppose good X sells for 200 per unit, good Y sells for 15 per unit, the company utilizes 2,000 units of advertising, and consumer income is 10,000. How much of good X do consumers purchase? Are goods X and Y substitutes or complements? Is good X a normal or an inferior good?
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- Explain the type of pricing strategy that you as the manager of a company would implementfor Good X and Good Y with the following price elasticity of demand co efficients. Usediagrams to motivate your answer.a). Good X: 2.3 b). Good Y: 0.6Q.1. Suppose the own price elasticity of demand for good X is −5, its income elasticity is 1, its advertising elasticity is 3, and the cross-price elasticity of demand between it and good Y is 4. Determine how much the consumption of this good will change if: Instructions: Enter your responses as percentages. If you are entering a negative number, be sure to use a (−) sign. a. The price of good X decreases by 5 percent. percent b. The price of good Y increases by 8 percent. percent c. Advertising decreases by 2 percent. percent d. Income increases by 4 percent. percentSuppose you are the managing director of a firm that produces two goods: A and B. The priceelasticity of demand for good A is 0.75 and for good B it is 2.5. The firm is experiencing seriouscash flow problems and you have to increase total revenue as soon as possible. If you were ina position to set the price for these two goods, what would be your pricing strategy for eachproduct?
- P t onces In a statement to P&G shareholders, the Chief executive officer (CEO) of Gillette (which is owned by P&G) indicated, "Despite several new product launches, Gillette's advertising-to-sales declined dramatically... to 5 percent last year. Gillette's advertising spending, in fact, is one of the lowest in our peer group of consumer product companies." If the elasticity of demand for Gillette's consumer products is similar to other firms in its peer group (which averages -4.5), what is Gillette's advertising elasticity? Instructions: Enter your response rounded to two decimal places. Is Gillette's demand more or less responsive to advertising than other firms in its peer group? O Less responsive More responsive It responds the same.Page |6 4. Calculate demand functions with different intercept and draw on graph. Qd = 1,400 – 10P Odz = 1,700 – 10P Qdz= 1,100 – 10P 160 140 Demand = 1,400 – 10P 1.700 – 10P | 1.100 – 10P Price Demandz = Demand; = 120 100 20 40 80 60 60 80 100 40 120 20 F 140 160 1000 1100 1200 400 500 600 700 900 5. Calculate demand functions with different intercept and draw on graph. Qs = -400 – 20P Os2 =-100 – 20P Qs3 =-700 – 20P 160 140 120 Supply = -400 + 20P Supply2 = -100 + 20P Supply; = -700 + 20P Price 100 80 20 40 60 60 So 40 100 | 120 | 140 | 160 20 P 400 500 600 700 800 900 1000 1100 1200. A hot dog vendor faces a daily demand curve of Q=1800-15P, where P is the price of a hot dog in cents and Q is the number of hot dogs purchased each day. I. if the vendor has been selling 300 hot dogs each day, how much revenue has he been collecting? II. What is the price elasticity of demand for hot dogs (hint: you can use the formula for elasticity that is slope times (P/Q) or you can calculate the elasticity by picking a new P and Q – ie try P=120 and calculate the new Q and solve for elasticity)? III. Does the law of demand hold? IV. If the vendor wants to generate more revenue, should he raise or lower the price of hot dogs?
- Aruna owns Pottery Plus, a small firm that produces terra cotta pots for sale in the Edmonton area. The graph below shows Aruna's demand curve. Price ($) 40 36 32 28 24 20 16 12 8 4 8 12 16 20 24 28 32 36 40 Quantity per period Search 3 of 6 SAMSUNG Next > 4ABC Co, a store that sells various types of sports clothing and other sports items, is planning to introduce a new design of Arizona Diamondbacks’ baseball caps. A consultant has estimated the demand curve to be Q = 2,000 - 100P where Q is cap sales and P is price. How many caps could ABC sell at $6 each? How much would the price have to be to sell 1,800 caps? Suppose ABC were to use the caps as a promotion. How many caps could ABC give away free? At what price would no caps be sold? Calculate the point price elasticity of demand at a price of $6.17 If the inverse demand function for computers was p = 70 - qAnd the selling price was $35 could you increase price to receive more revenue?
- The Nguyen’s Noodle House in a country town decides to due to the Covid 19 situation to decrease the prices for its takeaway meals by 5%. What will happen to their total revenue and the quantity sold if their product is: a) An elastic product? b) A unitary elastic product? c) An inelastic product? d) Which type of elasticity type do you think will apply to the meals of Nguyen’s Noodle House? Briefly explain what determinants of price elasticity will affect the product demand?Timmy is selling his toy dinos again. The consumer demand curve for thedinos is given by: x=(50-3p)^2 where p is the price per dino, and x is the demand in weekly sales. a.) Find the Elasticity of Demand function E(p) and evaluate it at the price p = $5.Is the demand elastic, inelastic, or does it have unit elasticity? Explain what this means inyour own words. b.) Find the price Timmy needs to charge for his dinos in order to maximize revenue.(Round your answer to the nearest cent.)6. Al's Appliancemart has market power in selling refrigerators. He just got in a shipment of undamaged refrigerators. Al has determined that there are two different types of buyers. One group are high demanders who have a more inelastic demand but tend to be picky about how nice their appliances look (they won't buy a dented one). Other buyers, low demanders, have a relatively more elastic demand, but also don't mind having a refrigerator with some dents. He pays $600 for each refrigerator from his supplier. 3/3 He has calculated that the high and low demander demand functions follows: Low: P = 1,000-0.5QL (QL = 2,000 - 2P) High: P = 1,600 - QH (QH = 1,600 – P) How much profit could Al earn if he sells them as is? How many should he add dents to (with a hammer) in order to maximize profit? What price would he then put on the non-dented and the dented refrigerators and how many would he sell of each? What would his profit then be?