1. The Dolan Corporation, a maker of small engines, determines that in 2011 the demand curve...

1. The Dolan Corporation, a maker of small engines, determines that in 2011 the demand curve for its products was

P = 2,000 – 50 Q,

where P is the price (in dollars) of an engine and Q is the number of engines sold per month.

a. To sell 20 engines per month, what price would Dolan have to charge?

b. If managers set the price at $500, how many engines will Dolan sell per month?

c. What is the price elasticity of demand when the price is $500?

d. At what price, if any, will the demand for Dolan’s engines be unitary elastic?

Expert Solution

a)Substitute the quantity (20) for Q in the demand equation and solve for P. P = 2,000 –50 (20) = $1,000.

b)Substitute the price ($500) for P in the demand equation and solve for Q.

500 = 2,000 –50 Q =50 Q = 2,000 –500 =Q = 30

C)

Demand elasticity

substitute for the slope and for the price and quantity combination as follows: 1/η = (-50) (30/500) = - 1500/500 = -3

Therefore, the price elasticity of demand

(η) is –1/3

d)

As we discussed above, price elasticity of demand is -1 at the midpoint of the demand curve. This point is also the midpoint of the intercept. Since the intercept in the demand equation is 2,000, half of that is 1,000. Now we simply need to find the quantity on the demand curve when the price is $1,000. Substitute 1,000 in the demand equation and you will get: 1000 = 2,000 –50 Q =50 Q = 2,000 –1000 =Q = 20 Therefore, the price elasticity of demand is -1 at price of $1,000 and quantity of 20.

Rahul Sunny answered 2 years ago

What determines the shape of a demand curve? In your explanation, you must define the income...

What determines the shape of a demand curve? In your explanation, you must define the income and substitution effect.

1-The intersection between the IS curve and the LM curve determines 2-An increase in money supply...

1-The intersection between the IS curve and the LM curve determines 2-An increase in money supply shifts the ______ curve to the right, and the aggregate demand curve______ 3-In the IS-LM model when government spending rises, the interest rate______ and output_______ 4-If taxes are raised, to prevent income from falling the central bank will 5-In the short- run, if IS-LM equilibrium occurs at a level of income below the natural level of output, then in the long-run the price level...

In a small town in France, the demand curve for wine is given by PD =...

In a small town in France, the demand curve for wine is given by PD = 124 - 2QD and the supply curve for wine is given by PS = 4 + 2QS. Suppose a price ceiling is imposed on wine at a price of $50. This will cause a _____________(shortage/surplus) of ______________ bottles of wine.

Elasticity of demand curve 1 = - 0.5 Elasticity of demand curve 2 = - 2.5...

Elasticity of demand curve 1 = - 0.5 Elasticity of demand curve 2 = - 2.5 Elasticity of demand curve 3 = - 0.2 Which of the following provides the greatest moral hazard potential? Group of answer choices all provides identical levels of moral hazard D2 D3 D1

For a small country called Boxland, the equation of the domestic demand curve for cardboard is...

For a small country called Boxland, the equation of the domestic demand curve for cardboard is Q D = 200 − 2P , where Q D represents the domestic quantity of cardboard demanded, in tons, and P represents the price of a ton of cardboard. For Boxland, the equation of the domestic supply curve for cardboard is Q S = -60 + 3P , where Q S represents the domestic quantity of cardboard supplied, in tons, and P again represents the price...

A small country’s demand curve is given by Q=10-(P/2) and its supply curve is given by...

A small country’s demand curve is given by Q=10-(P/2) and its supply curve is given by Q=P-5. Assume that there is initially free trade and that the world price under free trade is $7. If an import quota of 1.5 is now introduced in this country, what will be the change in this country’s government revenue (everything else being equal) if foreign firms have to acquire an import licence at full value? A increases by 7 B increases by 3...

Universal Automotive Group is a maker of engines for high performance cars and uses a process...

Universal Automotive Group is a maker of engines for high performance cars and uses a process costing system. The following information pertains to the final department of manufacturing for Universal's most popular engine, the "Atomic 8". Beginning work-in-process (40% completed) 400 units Transferred-in 1,600 units Normal spoilage 100 units Abnormal spoilage 100 units Good units transferred out 1,400 units Ending work-in-process (25% completed) 400 units Conversion costs in beginning inventory $180,500 Current conversion costs $728,218 Universal Automotive Group calculates separate...

The demand curve for X goods is Xd=100-10P and the supply curve is MCx=1. The demand...

The demand curve for X goods is Xd=100-10P and the supply curve is MCx=1. The demand curve for Y goods is Yd=100-20P and the supply curve is MCy=1. A tax of $2 per unit on goods X and no tax on goods Y. a. Calculate tax revenues and excesses in X goods. b. Explain the total tax revenue and excess burden if you reduce the tax on goods X to one dollar and impose one dollar per unit on goods...

What determines the current demand for labour?

Oxford Engineering manufactures small engines. The engines are sold to manufacturers who install them in such...

Oxford Engineering manufactures small engines. The engines are sold to manufacturers who install them in such products as lawn mowers. The company currently manufactures all the parts used in these engines but is considering a proposal from an external supplier to supply the starter assembly used in these engines. The starter assembly is currently manufactured in Division 3 of Oxford Engineering. Last year, Division 3 manufactured 132,000 starter assemblies, but over the next several years, it is expected that 161,000...

Question