Question

You are presented with the following data from The Home Depot (THD) on sales of its Snowminator Snow Shovel during the winters of 2012-2015, throughout Canada. The product’s price (P), measured in Canadian Dollars, is: 26, 22, 18, 14, 10, 6, and 2. The corresponding quantity demanded (Qd) in the Northern part of the nation, measured in millions of shovels, was: 3, 6, 9, 12, 15, 18, and 21. While the corresponding quantity demanded, measured in millions of shovels, in the Southern part of the nation was: 4, 6, 8, 10, 12, 14, and 16. Assume all the data was retrieved internally from The Home Depot.

1. In two separate graphs that you have created using Excel, clearly and accurately graph the demand and total revenue curves for the Northern part of Canada. These will be graph # 1 and # 2, respectively. (36 pts; 18 pts per graph) 2.In a separate graph from part A above, clearly and accurately graph the demand curve for the Southern part of Canada. This will be graph # 3. (10 pts) 3.Solely consider your graphs and data in part A above. Following the demand curve from $26 to 22 to 18, etc., and all the way down to $2. Explain by referencing only the demand curve, total revenue curve, and the elasticity of demand, how a declining price can have three different impacts on total revenue. (10 pts) 4.Consider your knowledge of the determinants of the elasticity of demand and consider the two demand curves you have in part A and B above. A visual inspection clearly indicates the curves are of differing slopes. Take one concrete cause and address why the demand curve in B has a different slope when compared to that of A. Explain why, do not simply re-state what is stated in the question already. (4 pts)

Answer 1

Sol

1

Graph 1

Graph 2

2

Graph 3

3

Whwn price falls from 26 to 14 , demand as well as total revenue increases . This is because elasticity of demand is greater than one in this part of demand curve.At q = 12 , total revenue is maximum where elasticity of demand is one..When price falls from 14 to 2 total revenue falls .This is because elasticity becomes less than one.

4

This is due difference in weather conditions in northern and southern part of the nation.