A manufacturer of a new patented product has found that he can sell 70 units a week to the customer if the price is $48. In error, the price was recently advertised at $78 and as a result, only 40 units were sold in a week. The manufacturers fixed costs of production are $1,710 a week and variable costs are $9 per unit. You are required to: a. Show the equation of the demand function linking price (P) to quantity demanded (X) assuming it to be a straight line is P = 118-x

A manufacturer of a new patented product has found that he can sell 70 units a week to the customer if the price is $48. In error, the price was recently advertised at $78 and as a result, only 40 units were sold in a week. The manufacturers fixed costs of production are $1,710 a week and variable costs are $9 per unit. You are required to: a. Show the equation of the demand function linking price (P) to quantity demanded (X) assuming it to be a straight line is P = 118-x

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter11: Price And Output Determination: Monopoly And Dominant Firms

Section: Chapter Questions

Problem 6E

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A manufacturer of a new patented product has found that she can sell 70 units a week direct to the customer if the price is $78. In error, the price was advertised as $138, and, as a result only 40 units were sold in a week. The manufacturer's fixed costs of production are $50 a week and variable costs of $18 per unit. You are required to: a. Show the equation of the demand function linking price(P) to quantity demand(X), assuming it to be a straight line, is P+2X=218 b. Find where the manufacturer breaks even c. Find the quantity that maximizes profit d. Recommend a unit price which would maximize profit e. Determine the maximum profit f. Find the equation of new demand function, assuming a sudden change in trading conditions resulting a 20% reduction in demand at all price levels
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