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    Q 1400 (This Is The Quantity of Caps Which Will Sell at Price of $6)

    Uploaded by

    Abubaker Nathani
    The document describes demand and supply relationships for posters and baseball caps. It provides the equations for quantity demanded and supplied in terms of price for posters, and calculates the equilibrium price as $4. For baseball caps, it estimates the demand curve and uses the equation to calculate quantities that would be sold, price needed to sell a given quantity, quantity that could be given away for free, price where no caps would sell, and point price elasticity of demand at a price of $6.

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    Q 1400 (This Is The Quantity of Caps Which Will Sell at Price of $6)

    Uploaded by

    Abubaker Nathani
    89 views2 pages
    The document describes demand and supply relationships for posters and baseball caps. It provides the equations for quantity demanded and supplied in terms of price for posters, and calculates the equilibrium price as $4. For baseball caps, it estimates the demand curve and uses the equation to calculate quantities that would be sold, price needed to sell a given quantity, quantity that could be given away for free, price where no caps would sell, and point price elasticity of demand at a price of $6.

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    Original Title

    Managerial Economics

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    The document describes demand and supply relationships for posters and baseball caps. It provides the equations for quantity demanded and supplied in terms of price for posters, and calculates the equilibrium price as $4. For baseball caps, it estimates the demand curve and uses the equation to calculate quantities that would be sold, price needed to sell a given quantity, quantity that could be given away for free, price where no caps would sell, and point price elasticity of demand at a price of $6.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    89 views2 pages

    Q 1400 (This Is The Quantity of Caps Which Will Sell at Price of $6)

    Uploaded by

    Abubaker Nathani
    The document describes demand and supply relationships for posters and baseball caps. It provides the equations for quantity demanded and supplied in terms of price for posters, and calculates the equilibrium price as $4. For baseball caps, it estimates the demand curve and uses the equation to calculate quantities that would be sold, price needed to sell a given quantity, quantity that could be given away for free, price where no caps would sell, and point price elasticity of demand at a price of $6.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 2

    Q1) The following relations describe the supply and demand for posters.

    QD = 65,000 - 10,000P and QS = -35,000 + 15,000P where Q is the quantity and P is the
    price of
    a poster, in dollars.
    Part a)

    QD = 65,000 - 10,000P and QS = -35,000 + 15,000P


    Price in $ Qd Qs Surplus Shortage
    6 5000 55000 Surplus of 50000
    5 15000 40000 Surplus of 25000
    4 25000 25000 Equilibrium point
    3 35000 10000 Shortage of 25000
    2 45000 -5000 Shortage of 50000
    1 55000 -20000 Shortage of 75000

    Part b)
    What is the equilibrium price?

    QD = 65,000 - 10,000P and QS = -35,000 + 15,000P


    Qd=Qs

    65000-10000P=-35000+15000P

    -15000P-10000P=-35000-65000

    -25000P =-100000

    P=-100000/-25000

    P= $4

    $4 IS THE EQULIBRIUM PRICE IN THIIS RELATION.

    Q2) ABC Co, a store that sells various types of sports clothing and other sports items, is
    planning to introduce a new design of Arizona Diamondbacks’ baseball caps. A
    consultant has
    estimated the demand curve to be Q = 2,000 - 100P
    where Q is cap sales and P is price.
    a. How many caps could ABC sell at $6 each?

    Q=2000-100P
    Q= 2000 – 100 (6)
    Q= 1400 (This is the quantity of caps which will sell at price of $6)
    b. How much would the price have to be to sell 1,800 caps?

    Q = 2,000 - 100P
    1800 = 2000 – 100P
    100P = 2000-1800
    P=200/100
    P= $2 (AT THIS PRICE 1800 CAPS WILL SELL OUT)

    c. Suppose ABC were to use the caps as a promotion. How many caps could ABC give
    away free?
    Q = 2,000 - 100P
    Assume price “0” as we are giving away caps as promotion.

    Q=2000-100(0)
    Q = 2000 (THIS IS THE QUANITY OF CAPS WHICH ABC COMPANY CAN GIVE AWAY FREE)

    d. At what price would no caps be sold?

    Q = 2,000 - 100P

    No caps be sold which Q=0

    0= 2000-100P
    100P= 2000-0
    100P= 2000
    P= 2000/100
    P= $20 (At this price ABC would be not be able to sell any caps)

    e. Calculate the point price elasticity of demand at a price of $6.

    Q = 2,000 - 100P
    For point price elasticity

    ∆Q/∆P * P/Q

    From the equation we know that ∆Q/∆P is -100.

    = -100* 6/1400. (Q at price $6 is 1400 as we have solved it above in part a)


    = -0.42 (This is the point price elasticity at $6)

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