Compute the quantity sold and the own price elasticity

Assignment Help Econometrics

Reference no: EM13239395

Robinson Plastics makes clear plastic products with injection molding techniques. Their latest invention is a plastic cup with a sharp blade mounted inside to cut prescription pills into small pieces. The cup is placed over the pill and as the cup is pressed down, the pill is split into pieces which are contained inside the cup. Because the cup is above the pill, persons can see how the pill is cut and keep the pieces contained. The presumed market is drugstores who would then sell to customers who want to reduce dosage size.
A survey of local drug manufacturers and retailers suggest that market demand over the next year can be characterized by:
Q = 2000000 - 100000*P + 5*A
Where Q=unit sales, P=price in dollars, and A=advertising expenditure in trade journals and publications.
Robinson is considering a price of either $1 or $2 and an advertising budget of $10,000. Robinson has estimated production cost at $0.75 per unit.
a. Compute the quantity sold and the own price elasticity's at the $1 and $2 sales prices, assuming the stated advertising budget.

b. What is the advertising elasticity at the sales price of $2 assuming the stated advertising budget?

c. How useful is this demand equation for forecasting demand for the pill slicer in the next five years? Explain.

Reference no: EM13239395

Questions Cloud

Find the resistance of the wire : High-voltage power lines are a familiar sight throughout the country, What is the resistance of 15 kilometers of this wire

What happens to the afc-per paper and the mc per paper : You also have a marginal printing cost of $.25 per paper as well as a marginal delivery cost of $.10 per paper. If sales fall by 20 percent from 1 million papers to 800,000 per month, what happens to the AFC, per paper, the MC per paper

Describe the final concentration sodium chloride solution : What is the final concentration (in M) of 18.5 mL sodium chloride solution with an initial concentration of 1.78 M which is diluted with 15 mL of solvent? Assume the volumes are additive.

Discuss the pros and cons of globalization : Discuss the pros and cons of globalization as it applies to individual civilizations in the contemporary world.

Compute the quantity sold and the own price elasticity : Robinson Plastics makes clear plastic products with injection molding techniques. Their latest invention is a plastic cup with a sharp blade mounted inside to cut prescription pills into small pieces.

Find the lesser and greater charge : Two point charges 3.0cm apart have an electric potential energy -130?J, find the lesser and greater charge

Comparing how successful the comparative asian : Comparing how successful the comparative Asian empires were in administering government when absent from local areas. The above information should help you put this together.

Explain the reaction vessel favor formation of the products : In which of the following reactions does an instantaneous increase in the volume of the reaction vessel favor formation of the products

Why cant an individual from a firm raise its price : Do you agree or disagree with the statement that: "A monopolist always changes the highest possible price Why can't an individual from a firm raise it's price by reducing output or lower its price to increase sales volume in a purely competive mar..

User Account

All Pages