Rad Designs sells two kinds of sweatshirts that compete with one another. Their demand functions are expressed by the following relationships: 91 = 78 – 6p1 – 3p2 %D 92%3D 66 - Зр, — бр2 Where p, and p2 are the prices of the sweatshirts in multiples of $10 and q, and q2 are the quantities of the sweatshirts demanded, in hundreds of units. a. Find the formula for total revenue in terms of p, and P2 note: R = P1q1 +P292 %3D b. What prices p, and p2 should be charged for each product in order to maximize revenue? c. How many units of each will be demanded? d. What is the maximum total revenue?

Rad Designs sells two kinds of sweatshirts that compete with one another. Their demand functions are expressed by the following relationships: 91 = 78 – 6p1 – 3p2 %D 92%3D 66 - Зр, — бр2 Where p, and p2 are the prices of the sweatshirts in multiples of $10 and q, and q2 are the quantities of the sweatshirts demanded, in hundreds of units. a. Find the formula for total revenue in terms of p, and P2 note: R = P1q1 +P292 %3D b. What prices p, and p2 should be charged for each product in order to maximize revenue? c. How many units of each will be demanded? d. What is the maximum total 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

Chapter14: Pricing Techniques And Analysis

Section: Chapter Questions

Problem 2E: The price elasticity of demand for air travel differs radically from first-class (1.3) to...

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The manager of the Sell-Rite drug store accidentally mismarked a shipment of 20-pound bags of charcoal at $4.38 instead of the regular price of $5.18. At the end of a week, the store's inventory of 200 bags of charcoal was completely sold out. The store normally sells an average of 150 bags per week. (a)What is the store's arc elasticity of demand for charcoal? (b)Give an economic interpretation of the numerical value obtained in part (a)
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An analyst for FoodMax estimates that the demand for its “Brand X" potato chips is given by: InQx = 10.34 – 3.2 In Px+ 4Py+ 1.5 In Ax where Qx and Px are the respective quantity and price of a four-ounce bag of Brand X potato chips, Pyis the price of a six-ounce bag sold by its only competitor, and Ax is FoodMax's level of advertising on brand X potato chips. Last year, FoodMax sold 5 million bags of Brand X chips and spent $0.25 million on advertising. Its plant lease is $2.5 million (this annual contract includes utilities) and its depreciation charge for capital equipment was $2.5 million; payments to employees (all of whom earn annual salaries) were $0.5 million. The only other costs associated with manufacturing and distributing Brand X chips are the costs of raw potatoes, peanut oil, and bags; last year FoodMax spent $2.5 million on these items, which were purchased in competitive input markets. Based on this information, what is the profit-maximizing price for a bag of Brand X…
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