Question

Belvedere, Colorado is engaging in a bumper-sticker advertising campaign. Monthly sales data from ski shops selling the "Don't Worry-Be Happy (in Belvedere)" bumper-stickers indicate that:

Q = 6,000 - 2,000P

where Q is bumper-sticker sales and P is price.

A.	How many bumper-stickers could Aspen sell at $2 each?
B.	What price would Aspen have to charge to sell 5,000 bumper-stickers?
C.	At what price would bumper-sticker sales equal zero?
D.	How many bumper-stickers could be given away?
E.	Calculate the point price elasticity of demand at a price of $1.

Answer 1

1. the sales data is given by the function

Q=6000-2000P

At P =$2

Q = 6000-2000*2 = 2000 (putting the value of P=2 in the given function)

2. for Q = 5000

5000=6000-2000P

2000P = 1000

P = $0.5 (putting the value of Q=5000 in the given function)

3. For sales=0 or Q=0

0=6000-2000P

2000P = 6000

P = $3 (putting the value of Q=0 in the given function)

4. for bumpers to be given away, P = 0

Q = 6000 – 2000*0 = 6000

5. Point Ed at P=1,

At P=1, Q = 6000-2000*1 = 4000

Ed = (dQ/dP)*(P/Q)

=-2000*(1/4000)

=-0.5