=

Where P is the price of the product and Q is quantity demanded. There are two parameters in this equation: the intercept a, and the slope b, with which you are now very familiar. If you dont remember what these are, please refer to lecture notes and refresh your memory. The assignment is asking that you to use this form of the demand function [not the direct demand equation] to estimate the parameters of the equation. To construct the demand for your product, you must come up with your best guess/estimate of a and b. Your estimate should not be a random number or an arbitrary number. Being the expert for your product, your estimate of the intercept a, and the slope b should make economic sense and be consistent with the nature of your product. You must show the reason(s) why you have chosen a specific value for a and b because if these estimates are not reasonable, then the demand equation you will construct will be meaningless. Simply picking a number as your best guess, without giving an economic justification is NOT sufficient. In addition, you must present an interpretation of what these parameters mean as it relates to your product and why it would make sense for your market. Once you show a reasonable estimate for a and b, you must specifically and clearly show the inverse demand equation. Please do not leave me guessing what your equation is!

Strawberries Cost $8.99 2lb (20-25 berries)

Baking Chocolate

• Milk Chocolate $27.96 (6 bags 10oz each bag)
• Dark Chocolate $24.95 (6 bags 10oz each bag)

Medium box (fits a dozen) Cost $28.49 (25 boxes)

Total Cost for a box of dozen strawberries = $35