The demand for Ipads is estimated to be: Q=3,000−4P+8I+2PS−2PLQ=3,000−4P+8I+2PS−2PL where QQ is the quantity of Ipads demanded, PP is the price of Ipads, II is the average consumer income, PSPS is the price of Samsung tablets and PLPL is the price of laptops. a. Apple is expecting that Samsung will drop the price of its tablets by $50. What will be the impact on the quantity demanded of Ipads? b. Suppose that Apple wants to respond to Samsung's price drop, how much would Apple need to change its price to maintain the quantity demanded at the level it was before Samsung's price change, i.e. to offset the effect of Samsung's price
The
Q=3,000−4P+8I+2PS−2PLQ=3,000−4P+8I+2PS−2PL
where QQ is the quantity of Ipads demanded, PP is the
a. Apple is expecting that Samsung will drop the price of its tablets by $50. What will be the impact on the quantity demanded of Ipads?
b. Suppose that Apple wants to respond to Samsung's price drop, how much would Apple need to change its price to maintain the quantity demanded at the level it was before Samsung's price change, i.e. to offset the effect of Samsung's price drop?
c. Suppose that Samsung changes its price as in (a) but, before Apple adjusts its price, the price of laptops falls by $100. Based on the above equation, are laptops a complement or a substitute to Ipads? Does Apple still need to change its price to maintain the quantity demanded unchanged? If so, by how much?
Step by step
Solved in 5 steps
