The R. J. Jones Company is a publisher of cowboy novels - novels about the great western experience, where men were men, horses were horses, andwell, you get the idea. The corporation has hired an economist to determine the demand for its product. After months of hard work and the submission of a REALLY large bill, the analyst tells the company that the demand for the firm's novels (Qx) is given by the following equation:
(Qx) = 12,000 - 5,000Px + 5I + 500Pc
wherePx is the price charged for the novels, I is income per capita, and Pc is the price of books from competing publishers.
Using this information, the company managers want to:
A. Determine what effect a price increase would have on total revenues.
B. Evaluate how the sale of the novels would change during a period of rising incomes.
C. Assess the probable impact if competing publishers raise their prices. Assume that the initial values of Px, I, and Pc are $5, $ 10,000, and $ 6, respectively.