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The economic analysis division of Mapco Enterprises has estimated the demand function for its line of weed trimmers as

QD = 18,000 + 0.4N - 350PM + 90PS

where N = number of new homes completed in the primary market area
PM = price of the Mapco trimmer
PS = price of its competitor's Surefire trimmer

In 2010, 15,000 new homes are expected to be completed in the primary market area. Mapco plans to charge $50 for its trimmer. The Surefire trimmer is expected to sell for $55.

a. What sales are forecast for 2010 under these conditions?

b. Ifits competitor cuts the price ofthe Surefire trimmer to $50, what effect will this have on Mapco's sales?

c. What effect would a 30 percent reduction in the number of new homes completed have on Mapco's sales (ignore the impact of the price cut of the Surefire trimmer)?

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M947902

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