The economic analysis division of Mapco Enterprise has estimated the demand function for its line of weed trimmers as
Qp= 18,000 + 0.4N -350Pm + 90Ps
Where N= numbers of new homes completed in the primary market area
Pm=price of the Mapco Trimmer
Ps = price of its competitors surefire trimmer
In 2010, 15,000 new homes are expected to be completed in the primary market area. Mapco plans to charge $5 for its tirmmer. The Surefire trimmer is expected to sell for $55.
a. What sales are forecast for 2010 under this condition?
b. If its competitors cut the price of the Surefire trimmer to $50, what effect would these have on Mapco sales?
c. 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)?