Question
Question 1: The Dolan Corporation, a maker of small engines, determines that in 2012 the demand curve for its product is: P = 2,000 -
Question 1: The Dolan Corporation, a maker of small engines, determines that in 2012 the demand curve for its product is: P = 2,000 - 50Q 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 a price of $500, how many engines will Dolan sell per month?
Question 2: After a careful statistical analysis, the Chidester Company concludes the demand function for its product is: Q = 500 - 3P + 2Pr + 0.1I where Q is the quantity demanded of its product, P is the price of its product, Pr is the price of its rival's product, and I is per capita disposable income (in dollars). At present, P = $10, Pr = $20, and I = $6,000. a. What is the price elasticity of demand for the firm's product? b. What is the income elasticity of demand for the firm's product? c. What is the cross- price elasticity of demand between its product and its rival's product?
Question 4: The Haas Corporation's executive circulates a memo to the firm's top management in which he argues for a reduction in the price of the firm's product. He says such a price cut will increase the firm's sales and profits. The firm's marketing manager responds with a memo pointing out that the price elasticity of demand for the firm's product is about [ - 0.5 ]. Is the opinion and request of the executive correct and valid? Why?
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