Question #70536

NEXT is contemplating a T-shirt advertising promotion. Monthly sales data from T-shirt shops
marketing the “Eye Watch NEXT” design indicate that
Q = 1,500 – 200P
Where: Q is T-shirt sales and P is price.
A. How many T-shirts could NEXT sell at $4.50 each?
B. What price would NEXT have to charge to sell 900 T-shirts?
C. At what price would T-shirt sales equal zero?
D. Calculate the point price elasticity of demand at a price of $5?

Expert's answer

Quantity of T-shirts at the price $4.50 is:

Q = 1,500 – 200*4.5 = 600 (T-shirts)

Price for selling 900 T-shirts is:

900 = 1,500 – 200P

200P = 600

P = $3

T-shirts sales equal zero at the price:

1,500 – 200P = 0

200P = 1,500

P = $7.5

Quantity at the price of $5:

Q = 1,500 – 200*5 = 500 (T-shirts)

Price elasticity of demand:

E = (Q2-Q1)/Q1 / (P2-P1)/P1 = (500-600)/600/($5-$4.5)/$4.5 = -1.5

Q = 1,500 – 200*4.5 = 600 (T-shirts)

Price for selling 900 T-shirts is:

900 = 1,500 – 200P

200P = 600

P = $3

T-shirts sales equal zero at the price:

1,500 – 200P = 0

200P = 1,500

P = $7.5

Quantity at the price of $5:

Q = 1,500 – 200*5 = 500 (T-shirts)

Price elasticity of demand:

E = (Q2-Q1)/Q1 / (P2-P1)/P1 = (500-600)/600/($5-$4.5)/$4.5 = -1.5

## Comments

## Leave a comment