A firm sells its product to two groups of customers. Demand from group 1 is Q; = 100, 000 —5,000P, and demand from group 2 is @2 = 140, 000 — 10, O0OP.
a) Find the total demand that the firm faces for its product. Explain it first using pictures (you don’t have to draw them to scale; I just want you to see how to proceed) and then do the algebra.
Write your answer of the total demand as quantity as a function of price. (Hint: draw pictures following the example on p.35 of the slides on demand. Then carefully add the two demands horizontally; that is, at each price add the quantities demanded in both locations at that price)
b) Express now your answer as price as a function of quantity. 14. If Starbucks’s data analytics department estimates the income elasticity of demand for its coffee to be 1.6, how will the prospect of an economic boom (expected to increase consumers’ incomes by 3 percent over the next year) impact the quantity of coffee Starbucks expects to sell? (LOJ)
15. You are a division manager at Toyota. If your data analytics department estimates that the semiannual demand for the Highlander is Q = 150,000 — 1.5P, what price should you charge in order to maximize revenues from sales of the Highlander? (LOJ, LO2, LO4, LOS)