6. You estimate that a typical consumer's inverse demand function is P = 200 - 20Q and your cost function is C = 80Q. Determine the optimal two-part pricing strategy. How much will 4 consumers pay?
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- What demand-oriented pricing approach is being used??16. Revenue with Substitutable Products. The Camera Shop sells two popular models of digital single lens reflex (DSLR) cameras. The sales of these products are not inde- pendent; if the price of one increases, the sales of the other increases. In economics. these two camera models are called substitutable products. The store wishes to estab- lish a pricing policy to maximize revenue from these products. A study of price and sales data shows the following relationships between the quantity sold (N) and price (P) of each model: NA 195 0.6PA + 0.25PB N = 301+0.08PA-0.5PB a. Construct a model for the total revenue and implement it on a spreadsheet. b. Develop a two-way data table to estimate the optimal prices for each product in order to maximize the total revenue. Vary each price from $250 to $500 in incre- ments of $10.. UT Sports, a store that sells various types of sports clothing and other sports items, is planning to introduce a new design of World Cup Kits. A consultant has estimated the demand curve to be Q= 8400 – 420 P Where Q is cap sales and P is price. How many KITs could UT sell at $25.2 each? How much would the price have to be to sell 7,560 KITs? Suppose UT were to use the KITs as a promotion. How many KITs could UT give away free? At what price would no KITs be sold? Calculate the point price elasticity of demand at a price of $ 25.2.
- 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 ($) 40 36 32 28 24 20 16 12 8 4 8 12 16 20 24 28 32 36 40 Quantity per period Search 3 of 6 SAMSUNG Next > 4OOK rink erences Aruna owns Pottery Plus, a small firm that produces terra cotta pots for sale in the Edmonton area. The graph below shows Aruna's demand curve. Mc Graw Hill Price ($) 40 36 32 28 24 20 16 12 8 4 0 4 8 12 16 20 24 28 32 36 40 Quantity per period17. How can the elasticity of demand help in pricing strategy? Explain.
- c. Will Erin's total revenue rise if she increases the price from $90 to $110? d. Calculate the price elasticity of demand between $110 and $130.What are 2 products with different price elasticities of demand, and how do you analyze how firms can use information about price elasticity of demand to their advantage?Page |6 4. Calculate demand functions with different intercept and draw on graph. Qd = 1,400 – 10P Odz = 1,700 – 10P Qdz= 1,100 – 10P 160 140 Demand = 1,400 – 10P 1.700 – 10P | 1.100 – 10P Price Demandz = Demand; = 120 100 20 40 80 60 60 80 100 40 120 20 F 140 160 1000 1100 1200 400 500 600 700 900 5. Calculate demand functions with different intercept and draw on graph. Qs = -400 – 20P Os2 =-100 – 20P Qs3 =-700 – 20P 160 140 120 Supply = -400 + 20P Supply2 = -100 + 20P Supply; = -700 + 20P Price 100 80 20 40 60 60 So 40 100 | 120 | 140 | 160 20 P 400 500 600 700 800 900 1000 1100 1200
- For Washburn, what are examples of (a) shiftingthe demand curve to the right to get a higher pricefor a guitar line (movement of the demand curve)and (b) pricing decisions involving moving along ademand curve?2. Assume that Moscow Makkers, a new hamburger outlet in Moscow, is unsure of it pricing policy. Each week the store changes the hamburger price slightly, using various specials. Data on quantities sold and their corresponding prices ($) are contained in the file hamburger.xlsx Suppose that the demand equation that relates quantity sold (q,) to price (p,) is In(q,) = B, + In(p,)B2 +e,. Note that equation can be written in the more familiar form y, = B, +x, B2 +e, by defining y In(q,) and x In(p,). (7 points) Please enclose your computer output. (a) Assume that the assumption of the simple regression model hold for transformed value y and x. Find least squares estimates b, and b, of B and B2. [bl and b2 (b) Given an economic interpretation of least square estimate of B2 (b2).4. Calculate demand functions with different intercept and draw on graph. Qd = 1,400 – 10P Qdz = 1,700 – 10P Qd= 1,100 – 10P 160 140 Price Demandz = Demand; = 120 1,400 – 10P 1,700 – 10P | 1,100 – 10P 100 Demand = 20 80 40 60 60 80 100 40 120 140 20 160 400 500 600 700 S00 900 1000 1100 1200