The XYZ company is a producer of dishwashers. The company’s marketing department has estimated the following demand curve for the company’s best-selling model in one of its regions. Q = 2000-4P+6A+5l+5Pc – 4Ac Where Q = Number of dishwashers demanded P = $600; Price of dishwashers A = $150; Advertising expenditures (thousands) I = $50; GDP per capita (thousands) PC = $500; Competitor’s price AC = $200; Competitor’s advertising expenditures (thousands) a. Calculate the amount demanded for this product using the information given above. b. Plot the demand curve with P on the vertical axis and Q on the horizontal axis. c. Calculate the price to sell 3450 units. d. What would be the effect on the sales of dishwashers if the competitor reduces price by $50? What should be the change in P to offset the decrease in PC ? e. In response to competitor’s strategy of reducing PC , what else can the company do to keep sales at the same level if it does not want to change P ? (Base your answer on the information given above.) f. If the government increases the sales tax by 1 percent, what will be the sale price of dishwashers after the tax (assume that the elasticity of demand is equal to the elasticity of supply in absolute value).
