GetMoney Inc Marginal Analysis Report
1) 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 your consultant is V(Q) = 4Q + ?2.
a) What is the quantity that maximizes profits based upon the above information?
What are the corresponding maximum profits that you can earn? (Please use
graphs to support your answer.)
b) At the quantity that maximizes net benefit, are marginal revenues positive,
negative, or zero? At this quantity, would you recommend increasing production
in order to increase revenues? Why or why not. (Please use graphs to support your
c) Are marginal benefits equal to zero at this quantity? Why or why not?
2) Supply and Demand/Demand Analysis
Suppose that your analyst estimates the demand equation for good X as given below:
Good X sells for $1 per unit, good Y sells for $2 per unit, good Z sells for $1 per unit, and consumer income is $4.
a. Using the information provided by your analyst, please determine the demand equation. (Please use graphs to support your answer).
b. Please calculate the own price elasticity of demand for good X. Is the demand for good X elastic, inelastic, or unit elastic? (Please indicate where on your graph of the demand equation from part a, your calculation of own-price elasticity lies.)
c. If I increase the price of good X by 0.13%, what happens to revenues? (Please use graphs to support your answer.)
3) Supply and Demand
For this question, please find an article from a mainstream news source that discusses the effect of supply and demand shocks on prices in the market of a particular product and use graphs to support your answer. Please also discuss whether you think that the graphs and noted shocks are consistent with the discussion in the article regarding price effects.
4) Elasticity of demand For this question, please find an article from a mainstream news source that covers the topic of elasticity of demand, which highlights the importance of elasticity of demand, prices, and revenues as it affects the determination of prices in the market of a particular product and use graphs to support your answer.
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