Question

The table below shows two demand schedules for a given style of men’s shoe—that is, how many pairs per month will be demanded at various prices at a men’s clothing store in Seattle called Stromnord.

Price	D1 Quantity Demanded	D2 Quantity Demanded
$85	53	13
80	60	15
75	68	18
70	77	22
65	87	27

Suppose that Stromnord has exactly 55 pairs of this style of shoe in inventory at the start of the month of July and will not receive any more pairs of this style until at least August 1.

Instructions: Enter your answers as whole numbers.

a. If demand is D₁, what is the lowest price that Stromnord can charge so that it will not run out of this model of shoe in the month of July?

b. What if demand is D₂?

c.  If the price of shoes is set at $85 for both July and August and demand will be D₂ in July and D₁ in August, how many pairs of shoes should Stromnord order if it wants to end the month of August with exactly zero pairs of shoes in its inventory?

d.  What if the price is set at $65 for both months?

Answer 1

a) Total available number of pair of shoes in July are 55. Hence if demand is D1, then the only price that can be charged is $85. All other price will make demand more that 55 units which is not attainable.

b) If the demand is D2, then the lowest price chargeable is $65 where Stromnord can sell maximum pair of shoes ie. 27 unit.

c) Stromnord orders below mentioned quantity if it wants to end the month of August with exactly zero pairs of shoes in its inventory

		JULY	AUGUST
a)	Price	$       85	$         85
b)	Available pair of shoes	55	42
c)	Demand	13	53
d)	Balance for August (b-c)	42	NA
e)	Order to be placed in August (c-b)	NA	11

d) Stromnord orders below mentioned quantity if it wants to end the month of August with exactly zero pairs of shoes in its inventory

		JULY	AUGUST
a)	Price	$       65	$         65
b)	Available pair of shoes	55	28
c)	Demand	27	87
d)	Balance for August (b-c)	28	NA
e)	Order to be placed in August (c-b)	NA	59