Managerial Economics
Middleton
Problem Set #2
- Chapter 3, Problem #3
- Chapter 3, problem #4
- Suppose the demand curve for a good is given by Qxd =2,000 – 4 Px+ .04Pz , where Pz = 400.
- What is the own price elasticity of demand when Px =$154?Is demand inelastic or elastic?What would happen to the firm’s revenue if it decided to charge a price below $154?
- What is the own price elasticity of demand when Px = $354?Is demand inelastic or elastic?What would happen to the firm’s revenue if it decided to charge a price above $354?
- What is the cross price elasticity of demand between X and Z when Px = $154?Are X and Z substitutes or complements?
- Chapter 3, problem #9
- You are a division manager at Chevy. If your marketing department determines that the semiannual demand for the Malibu is Q = 50,000 – 1.6P, what price should you charge to maximize revenues from sales of the Malibu?
- You are the manager of a small computer company.You look back at your sales data and find that in March you sold 200 computers when the price was $800, and during your April sale, you sold 250 computers at a price of $750.What is your own price elasticity of demand?You are thinking about raising prices to $850 in June.Should you? Explain why or why not.
- The 2012 sales and profits of seven clothing companies were as follows:
Firm Sales ($ billions) Profit ($ billions)
Maxx 5.7 .27
Bleu 6.7 .12
Golden .2 0.00
Triex .6 .04
Chateau 3.8 .05
L&T 12.5 .46
Eastview .5 0.00
- Calculate the correlation coefficient between profit and sales.How are profit and sales related to each other? (Hint: use excel).
- Calculate the sample regression line, where profit is the dependent variable and sales is the independent variable. (Hint: use excel).
- Estimate the 2012 average profit of a clothing firm with 2012 sales of $.2 billion.
- Can the regression line be used to predict a clothing firm’s profit in 2026?Explain.