ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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Question
4). APPLEWATCH (this concentrates on the mathematical part of the readings) (19 Points)
a) This question is based on the impact of Lowering the Price of the Apple watch to $312 (note the original price of $349)
a. Calculate the Point Price Elasticity of Demand for the Apple Watch (this requires you to show your work, calculate the number and explain the results of the Price Elasticity of Demand—in effect, is it elastic or inelastic and why-you should use the original price and the new price of $312)? (6 Points)
b. Calculate new Total Revenue given this price reduction (begin by calculating what was initial total revenue when the price was $349). Note—use the demand function to calculate quantity demanded. (4 Points)
c. Given a Variable Cost that is provided on Page 5 of the lecture Powerpoint (and not including the sunk/fixed costs) what is the profit maximizing output given a price of $349? (3 points)
b) If Apple kept their price at $349 and Samsun reduced the price of their GearS to $255 - what would be the impact on the demand for the Apple Watch (this uses the original price from the paper and this requires a calculation and a numerical answer)
a. Quantity Demanded for the Apple Watch - this requires a calculation (3 Points)
b. Now - After Samsung reduced their price to $255, how much would Apple need to reduce their price to retain their market sales (this requires the calculation such that you stay at the same number of sales).
(3
Points)
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