Problem: The economic analysis division of Mapco Enterprises estimated the demand function for its line of weed trimmers as
Qd = 18,000 + 0.4N - 350Pm + 90Ps
where N = number of new homes completed in the primary market area
Pm = price of Mapco trimmer
Ps = price of its competitor's Surefire trimmer
In 2006, 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.
Q1. What sales are forecast for 2006 under these conditions?
Q2. If its competitor cuts the price of the Surefire trimmer to $50, what effect will it have on Mapco's sales?
Q3. 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)?