Question

Suppose that you are a business consultant for Trade
Kings. You are tasked to assess the impact of increase in
advertising budget and increase in price at the same time on total
revenue using the following three important pieces of
information:

(a) The company is expected to sell $100 thousand worth of the
product.

(b) It is estimated that a 1% increase in the advertising budget
would increase the quantity sold by 0.35%.

(c) It is also estimated that a 1% increase in the product's price
would reduce quantity sold by 0.25%.

By how much total revenue increases/decreases?

Answer #1

If initial quantity is Q and initial price is P,

Initial total revenue (R) = P x Q = 100,000

After advertising increases, new quantity (Qa) = Q x 1.0035

After price increases, new quantity (Qp) = Q x 1.0025

After both the changes, net new quantty (Q1) = Qa + Qb = Q x (1.0035 - 1.0025) = Q x 1.001

New price (P1) = 1.01 x P

New total revenue (R1) = P1 x Q1 = (1.01 x P) x (Q x 1.001) = 1.01101 x (P x Q) = 1.01101 x 100,000 = 101,101

**Increase in revenue =** R1 - R = 101,101 -
100,000 = **1,101**

Suppose that you are a business consultant for Trade Kings. You
are tasked to assess the impact of increase in advertising budget
and increase in price at the same time on total revenue using the
following three important pieces of information:
(a) The company is expected to sell K100 thousand worth of the
product.
(b) It is estimated that a 1% increase in the advertising budget
would increase the quantity sold by 0.35%.
(c) It is also estimated that a...

Suppose you own a pet shop. Your sales are decent but a
marketing consultant tells you that you could increase your sales
and be able to charge a higher price if you spend some money on
local television ads. If the consultant is right, will advertising
lead to an increase in quantity demanded? Or a shift in the demand
curve? Both? Neither? Explain your answer and make sure to cite at
least one of the required readings in your answer.

You are a business consultant in a remote and isolated small
town. Two customers, a dentist and a portrait artist, came to you
to ask for advice. They are considering to raise the price of their
service to increase revenue. Write a short report for each of them
using your economic training. How would your report be different if
all these happened in the context of a great metropolitan
area?

1. Society gains advantages through trade because of its ability
to
A) attain absolute advantage in our trade with other
nations.
B) specialize resources to the uses where opportunity cost is
minimized.
C) align output to reflect society’s preferences.
2. Identify which of the following microeconomic topics can have
an impact on macroeconomic topics?
A) How do people decide how much to save for the future, or
whether they should borrow to spend beyond their current
means?
B) What combination...

Suppose you are working as a consultant for a firm that is a
monopoly and is worried about its policies in the short run. What
would you recommend in terms of quantity changes (raise, cut, shut
down or stay put) and price changes (raise, cut, stay put) in each
of the following situations a through c:
a. [5 points] P = $299 MC = $349 AVC = $249
b. [5 points] MR = $150 MC = $100 AVC = $140...

A consultant hired by the company you work for must deal with the theft of merchandise at the company. His job is to make recommendations to the problem, as part of his research he presents a table that follows based on the alleged thefts of merchandise estimated at $ 400 thousand a year and a salary for the guards of W = $ 25 per hour. Complete the table.
# of security guards
Cost of Merchandise stolen
Marginal
Benefit
Total...

Marginal Analysis You are the manager of GetMoney Inc. and you
produce cardboard boxes. Suppose that you hired a consultant for
your company to estimate the demand for your cardboard boxes. You
collect data on the price and quantity of boxes sold and send it to
your consultant, who then estimates the inverse demand equation as
P = 14 – (1.5)*Q. Please also assume that you have a fixed cost of
$2 and that the variable cost as estimated by...

QUESTION 36 The price elasticity of demand for Alpha personal
computer is estimated to be -2.0. If the price of the computers
decreases by 5%, what would be the expected percentage changes in
the quantity demanded and in the total revenue for the company? a)
Quantity demanded would decrease by 10% and total revenue would
decreases by 5%. b) Quantity demanded would increase by 10% and
total revenue would increases by 5%. c) Quantity demanded would
decrease by 10% and...

As a manager of a firm, you have estimated that the demand for
the product the firm sells is $ Q D = 1,800 – 5 P – 0.25
I, where P is the price of a unit of the firm's product and I is
the average consumer income of the firm's customers. Currently, P =
$80 and I = $4,000.Based on this information, if you
decide to increase the price by 1%, then
a) Your total revenue from sales will...

Question. Suppose you are a consultant for a monopoly firm that
asks for an assessment of its policies in the short run. What would
you recommend in terms of quantity changes (raise, cut, shut down,
or stay put) and price changes (raise, cut, or stay put) in each of
the following situations (a through e):
a. [10 points] MR = $298 MC = $348 AVC = $288
b. [10 points] MR = $148 MC = $98 AVC = $138
c....

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 5 minutes ago

asked 6 minutes ago

asked 8 minutes ago

asked 20 minutes ago

asked 25 minutes ago

asked 25 minutes ago

asked 34 minutes ago

asked 37 minutes ago

asked 37 minutes ago

asked 41 minutes ago

asked 42 minutes ago

asked 42 minutes ago