P5.5 Demand Curves. KRMY-TV is contemplating a T-shirt advertising promotion. Monthly sales data from T-shirt shops marketing the “Eye Watch KRMY-TV” design indicate that Q = 1,500 – 200P where Q is T-shirt sales and P is price.
A. How many T-shirts could KRMY-TV sell at $4.50 each?
B. What price would KRMY-TV have to charge to sell 900 T-shirts?
C. At what price would T-shirt sales equal zero?
D. How many T-shirts could be given away?
E. Calculate the point price elasticity of demand at a price of $5.
P5.6 Optimal Pricing. In an effort to reduce excess end-of-the-model-year inventory, Harrison Ford offered a 2.5% discount off the average list price of Focus SE sedans sold during the month of August. Customer response was enthusiastic, with unit sales rising by 10% over the previous month’s level.
A. Calculate the point price elasticity of demand for Harrison Ford Focus SE sedans.
B. Calculate the profit-maximizing price per unit if Harrison Ford has an average wholesale cost of $10,000 and incurs marginal selling costs of $875 per unit.
P5.7 Cross-Price Elasticity. Kitty Russell’s Longbranch Cafe in Sausalito recently red
