Question

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1 Q. = 2000 - 40,000P.+.6S + 100Pop - 2,300P, + 3,000 Pc 4 P, is the price chips 5 S is the number of samples 6 Pop is the regional population (thousands) 7 Ps is the average price of candy sold 8 PC is the average price of other chips sold nearby 20 11 area population of 300,000 people 12 average price of candy is $2.10 13 average price of for chips is $1.80 14 3000 samples per week 16 weekly costs $10,000 fixed 17 $.90 each unit produced 18 average of $.75 for each sample handed out 19 chips sell for $1.00 per bag to make sure lots of soda is sold 21 1. Calculate quantity demanded 22 2. Calculate total revenue 23 3. calculate total cost (function and amount) 24 4. calculate profit 25 5. calculate price elasticity for demand 26 6. what is your price recommendationand then calculate quanitity demanded

Answer 1

Given

Qp = 2000 – 40000P. +0.65 + 100 Pop – 2300P, + 3000 P

Plug in the given values in the above equation we get

Op = 2000-40000 x 1+0.6 x 3000+100 x 30000 - 2300 x 2.1+3000 x 1.8

Op = 2000 – 40.000 + 1800+ 3.000.000 – 4830+ 5400

→Qp = 29,964,370

B. Total Revenue = PQ = $ 1 * 29,964,370 = $ 29,964,370

C. TC = 10,000 + 0.9Q + 0.75S

TC = 10,000 + 0.9*29,964,370 + 0.75*3000

TC = $ 26,980,183

D. Profit = TR- TC = $ 29,964,370 - $ 26,980,183 = $ 2,984,187

E. Elasticity of demand is defined as percent change in quantity over percent change in price

ΔΡ, Κρ,

differentiating the Qd function wrt Po we get

dQD do - [2000 – 40000P. + 0.6S + 100 Pop – 2300P, + 3000 Pc dPdP

dQD Po -= -40000

Plug in the values in the elasticity equation

E = -40,000 X 39 964 370 29.964 370 = -0.00133

Elasticity of demand = -0.00133 (Inelastic)

6.The elasticity of demand is inelastic. Therefore the price must be increased this will increase the total revenue of the firm.

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