Jane owns a bakery and she wishes to apply quantitative modelling to her small business. She estimates that the demand for her pullman loaves can be defined as in the following: d(x) = 2be 5 where b>0 and is a constant. Given that the loaves sell at price x pesos, formulate an optimization model that would allow her to maximize her revenue. At what selling price of the loaves will the optimal revenue be achieved? Selling Price Given the optimal selling price, how much revenue should Jane expect to receive? (round off to 4 decimal places) Optimal Revenue

Jane owns a bakery and she wishes to apply quantitative modelling to her small business. She estimates that the demand for her pullman loaves can be defined as in the following: d(x) = 2be 5 where b>0 and is a constant. Given that the loaves sell at price x pesos, formulate an optimization model that would allow her to maximize her revenue. At what selling price of the loaves will the optimal revenue be achieved? Selling Price Given the optimal selling price, how much revenue should Jane expect to receive? (round off to 4 decimal places) Optimal Revenue

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

Chapter4: Estimating Demand

Section: Chapter Questions

Problem 5E

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Suppose you have been hired by a research firm trying to understand the market for Widgets (a hypothetical product). Your analysis of the data indicates that the Demand curve for Widgets is estimated to be linear and given by equation Qd = 150 – 3P and the Supply curve for Widgets appears to be linear as well and is estimated as Qs = 2P – 20. Graphically draw these two curves, labeling all relevant points (such as intercepts for each line) on the horizontal and vertical axes.
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Demand for Magnum Ice Cream is given by an equation Q = - 5,000 – 40P + 20Px + 5I + 0.2A Where, Q = Quantity of Magnum demanded, P = Price of Magnum Ice Cream, Px = Price of Walls Ice Cream, I = Per Capita Income and A = advertisement expenditure. State and elaborate the key steps for analyzing regression results of demand. Assume P = Rs 500, Px = Rs 600, I = Rs 5,000 and A = 10,000 (Rs in thousands). Calculate elasticities for each of the variables: Price Elasticity of Demand Cross Price Elasticity of Demand Income Elasticity of Demand Advertisement Elasticity 3. How does each of the elasticities help in managerial decision making? Given these estimates should Magnum consider reducing its price to increase market share? Explain.
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A firm keeps a record of sales and prices over the past seven months, resulting in the following table: Price (ZMW/ton) Sales (tons) Nov. 1985 7.5 84.5 Dec. 8.0 82.0 Jan. 1986 8.0 84.0 Feb. 7.2 92.0 March 7.0 95.0 April 8.0 92.0 May 8.5 91.5 Use these observations to estimate demand as a linear function of both price and time. Further, utilise this function to estimate demand for the following month, on the assumption that: (a) price remains unchanged, (b) price increases to ZMW9/ton. Hence estimate the price elasticity of demand between these prices and find the price which would maximise sales revenue. Given the nature of the observations, comment on any difficulties in interpreting your results for decision-making purposes.