The marketing department of Acme Inc. has estimated the following demand function for its popular carpet...

The marketing department of Acme Inc. has estimated the following demand function for its popular carpet deodorizer, Freshbreeze:

Q^D = 100 -5p

where Q is the quantity of an 8 oz box sold (in thousand units) and p the price of an 8 oz. box.

1. Calculate the point price elasticity of demand E^D for price, $1, 2,3,……$19.

2. Describe the pattern of price elasticity of demand that you have calculated along the demand curve. (Include your brief explanation)

3. Have a graph including the demand curve.

Solutions

Expert Solution

2) Pattern of price elasticity of demand:

As price is increasing along the demand curve, price elasticity of demand also rises. At the mid point of the demand curve, price elastic of demand is 1. When Price is 20, elasticity is infinity. When price is 0 there the price elasticity of demand is 0. In the low range of price, Demand curve is Inelastic as price elasticity of demand is less than 1. In the high range of price , demand curve is elastic as price elasticity of demand is greater than 1.

Rahul Sunny answered 1 year ago

Next > < Previous

Related Solutions

Your marketing research department provides the following estimated demand function for your product: Qd = 500.6...

Your marketing research department provides the following estimated demand function for your product: Qd = 500.6 - 11.4P + 0.5INCOME where P is the price of your product and INCOME is average income. a. Is your product a normal good or an inferior good? Explain your answer. b. The standard error for the price coefficient is 2.0. What is its t-statistic? What can you conclude about the coefficient's statistical significance? c. The standard error for the income coefficient is 0.3....

A department store has estimated the demand curve for a popular brand of women’s dress shoes...

A department store has estimated the demand curve for a popular brand of women’s dress shoes as a function of price. Use the table to answer the question that follow. Points Price per pair Dress shoe sales per week A RO 18 100 B RO 15 200 C RO 12 300 D RO 9 400 E RO 6 500 F RO 3 600 Calculate demand elasticity between points A and B, between points C and D, and between points E...

4. The research department of Cardinal Novelties has estimated the demand function facing the firm for...

4. The research department of Cardinal Novelties has estimated the demand function facing the firm for price increases and price declines from the prevailing price are, respectively: Q = 250 -12.5P and Q’ = 208-9P The marginal and average total cost functions of the firm were also estimated to be, respectively: MC =1.75 + (1/50)Q and ATC = 1.75 + (1/25)Q Determine the best level of output of the firm, the price at which the firm sells its output, as...

1. The research department of Cardinal Novelties has estimated the demand function facing the firm for...

1. The research department of Cardinal Novelties has estimated the demand function facing the firm for price increases and price declines from the prevailing price are, respectively: Q = 220 -10P and Q’ = 145-5P The marginal and average total cost functions of the firm were also estimated to be, respectively: MC =2.5 + .05Q and ATC = 2.5 + .025Q Determine the best level of output of the firm, the price at which the firm sells its output, as...

The XYZ Company is a producer of dishwashers. The company’s marketing department has estimated the following demand curve for the company’s best-selling model in one of its regions.

The XYZ Company is a producer of dishwashers. The company’s marketing department has estimated the following demand curve for the company’s best-selling model in one of its regions. Q=2000-4P+6A+5I+5Pc-4Ac Where Q = Number of dishwashers demanded P = $600; Price of dishwashers A = $150; Advertising expenditures (thousands) I = $50; GDP per capita (thousands) PC = $500; Competitor’s price AC = $200; Competitor’s advertising expenditures (thousands) d. What would be the effect on the sales of dishwashers if...

Your marketing research department has estimated the demand for your firm's product to be Q=10,000−100P and...

Your marketing research department has estimated the demand for your firm's product to be Q=10,000−100P and the marginal revenue to be R=100−0.02Q. Suppose marginal cost and average total cost are constant at $60. What is the quantity that you should produce? ________ units.

The Marketing Department has estimated sales as follows for the remainder of the year (in units):...

The Marketing Department has estimated sales as follows for the remainder of the year (in units): July 34,000 October 24,000 August 78,000 November 10,500 September 47,000 December 11,000 The selling price of the beach umbrellas is $11 per unit. All sales are on account. Based on past experience, sales are collected in the following pattern: 30% in the month of sale 65% in the month following sale 5% uncollectible Sales for June totaled $297,000. The company maintains finished goods inventories...

If Starbucks’s marketing department estimates the income elasticity of demand for its coffee to be 2.85,...

If Starbucks’s marketing department estimates the income elasticity of demand for its coffee to be 2.85, how will the prospect of an economic bust (expected to decrease consumers’ incomes by 4 percent over the next year) impact the quantity of coffee Starbucks expects to sell?

A demand function has been estimated to be Qx = 550 – 5Px + 1.5Py -...

A demand function has been estimated to be Qx = 550 – 5Px + 1.5Py - 2Y. If drawn as a traditional demand curve connecting Px with Qx, an increase in Py would be visualized as a: Group of answer choices shift of the entire demand curve right. movement up the stationary demand curve. movement down the stationary demand curve. shift of the entire demand curve left.

The estimated demand function for commodity X is described by the following equation: ^ Qd =...

The estimated demand function for commodity X is described by the following equation: ^ Qd = 50 – 2Px + 1.5 In - 0.75 Py where Px = Price of commodity X In = Consumer Income Py = Price of commodity Y (a)Does the behavior of the consumer of this product follow the law of demand? Explain (b)Is commodity X a normal good or an inferior good? How did you know? (c)Comment on the relationship between commodity X and commodity...

Subjects