Chapter 5, Problem 6E

The economic analysis division of Mapco Enterprises has estimated the demand function for its line of weed trimmers as $Q_D=18,000+0.4N-350P_M+90P_s$

where $N=\text{number of new homes completed in the primary market area}$ $\begin{array}{l}{P}_M=\text{<x-custom-btb-me data-me-id="2095" class="microExplainerHighlight">price</x-custom-btb-me> of the Mapco trimmer}\\ P_S=\text{price of its competitor}’\text{s Surefire trimmer}\end{array}$

In 2010, 15,000 new homes are expected to be completed in the primary market area. Mapco plans to charge $50 for its trimmer. The Surefire trimmer is expected to sell for $55.

1. What sales are forecasted for 2010 under these conditions?
2. If its competitor cuts the price of the Surefire trimmer to $50, what effect will this have on Mapco’s sales?
3. What effect would a 30 percent reduction in the number of new homes completed have on Mapco’s sales (ignore the impact of the price cut of the Surefire trimmer)?