Problem 2:

The economic analysis division of Mapco Enterprises estimated the demand function for its line of weed trimmers as

QD = 18000 + 0.4N - 350 PM + 90 PS

Where N = number of new homes completed in the primary market area

PM = price of Mapco trimmer

PS = price of its competitor's Surefire trimmer

In 2022, 15000 new homes are expected to be completed in the primary market area. Mapco plans to charge $50 for its trimmer. The Surefire trimmer is expected to sell for $55.

1. What sales are forecast for 2022 under these conditions?
2. If its competitor cuts the price of the Surefire trimmer to $50, what affect will it have on Mapco's sales?
3. What effect would a 30-percent reduction in the number of new homes completed have on Mapco's sales (ignore the impact of the price cut of the Surefire trimmer)?