Assume the firm raised the price while increasing

Assignment Help Macroeconomics

Reference no: EM1337966

Supply and demand : key informaiton

Problem 1

Suppose a firm has the following demand equation:

Q = 1,000 - 3,000P + 10A,

where Q = quantity demanded

P = product price (in dollars)

A = advertising expenditures (in dollars)

Assume for the questions below that P = $3 and A = $2,000

1. Suppose the firm dropped the price to $2.50. Would this be beneficial? Explain. Illustrate your answer with the use of a demand schedule.
2. Suppose the firm raised the price to $4.00 while increasing the advertising expenditures by $100. Would this be beneficial? Explain. Illustrate your answer with the demand schedule.

Problem 2

A bookstore opens across the street from the University Book Store (UBS). The new store carries the same textbooks but offers a price 30 % lower than UBS. If the cross-elasticity is estimated to be 1.5, and UBS does not respond to its competition, how much of its sales is it going to lose?

Reference no: EM1337966

Questions Cloud

Explain what is an xml element : How can I make my existing HTML files work with XML?explain What is an XML element.

Analyze the structure of the evolution of the pc industry : Analyze the structure of the evolution of the PC industry and explain to justify your answer.

As consumer surplus is closely related to the supply : As consumer surplus is closely related to the supply curve for a product, producer surplus is closely related to the demand curve for a product.

Explain intellectual properties of health care firms : Explain Intellectual Properties Of Health Care Firms and How do you think these intellectual properties affect the firm that owns them and competitive health care firms

Assume the firm raised the price while increasing : Assume the firm raised the price to $4.00 while increasing the advertising expenditures by $100. Would this be beneficial. Explain. Illustrate your answer with the demand schedule.

Apple computer''s strategies in the pc business : Evaluate the Apple Computer's strategies contribute to its poor performance in the PC business.

Optimal cost of capital-wacc : What is meant by Weighted Average Cost of Capital (WACC)? Why is WACC a more appropriate discount rate when doing capital budgeting?

Search information on web page authenticity and credibility : The birth of the Internet has opened a new door for research. The World Wide Web provides endless amounts of information on just about anything you can think of. Anyone may create a Website; therefore, the question of reliability comes into play.

Determinant of commitment for it projects : Which determinant of commitment for IT projects would include those projects that have higher levels of commitment where there is strong support from the top?

User Account

All Pages