Market Research and Demand Curve Analysis
I have decided to go with wireless earphones as the final outcome of our deliberations. Choosing this product is based on the fact that music is one of my favorite pastimes. The most of the time, I listen to it on my phone or computer. I believe a large percentage of people do this. The wireless headphone is not a new product on the market, but there aren’t many vendors in this sector, so competition isn’t as intense. My product will appeal to a wide range of demographics, ranging from the young to the middle-aged. It will be offered at varying market rates depending on the market demand and many circumstances that may influence its availability. Lenovo’s product is currently available for a one-time purchase price of $100 and a per-item cost of $10, (Orovwiroro & Nwinee, 2019).
The quantity demanded decreases as the price rises, according to the first law of demand. Price and demand are directly linked, hence there is a direct correlation between these two variables. The demand curve is sloping downward with a negative gradient because of this. The y-intercept of a demand curve is “a,” and it indicates the highest price that customers are willing to pay for a product. In contrast, the demand equation’s slope, “b,” is always negative. In order to calculate it, you divide the changes in price by changes in the amount of goods being purchased. Market research can help me estimate both “a” and “b” more precisely as the manager of my product, because I can see the current market trends. With regard to wireless headphones, for example, I would analyze the prices of my competitors in order to get a sense of how much potential customers would be prepared to spend. My equation’s y-intercept will be determined by this value. The quantity demanded at various costs would be the subject of my market research. My “b” will be estimated after producing a graph of price versus quantity. Lenovo’s product has a unit price of $100 and a per-unit cost of $10. This is the demand equation. As a result, the following is a representation of the demand equation.
P=100-0.5Q Price (P) is the number of headphones requested (Q).
a). According to the demand equation,
P=100-0.5Q, Q= (100-P)/0.5.
Q=100-90/0.5 = 20 as a result of the price P=90
The following table lists the maximum and minimum quantity that can be purchased at each pricing point.
|
Minimum |
Maximum |
|
|
Price |
35 |
90 |
|
Quantity |
20 |
130 |
b)
C).
P=100-0.5Q suggests that Q=(100-P)/0.5 from the demand equation. As a result, for the price P=90 Q=100-90/0.5 = 20
Ed = (80/40*(75-80)/(50-40) = -1).
For $80, the elasticity of demand is -1, and there are 40 units in demand.
|
Price |
Quantity |
Total Revenue |
Marginal Revenue |
|
90 |
20 |
1800 |
70 |
|
80 |
40 |
3200 |
55 |
|
75 |
50 |
3750 |
35 |
|
60 |
80 |
4800 |
5 |
|
45 |
110 |
4950 |
-15 |
|
40 |
120 |
4800 |
-25 |
|
35 |
130 |
4550 |
Part a).
P=100-0.5Q suggests that Q=(100-P)/0.5 from the demand equation. As a result, for the price P=90 Q=100-90/0.5 = 20
Ed = (80/40*(75-80)/(50-40) = -1).
For $80, the elasticity of demand is -1, and there are 40 units in demand.
Part b).
Ed= 45/110 * (110-60) * (110-80) = -0.2045
Part c).
Yes, this is due to the fact that all of the components used to compute price elasticity are the same elements used to estimate marginal revenue, such as price and quantity, as well.
Part a
At profit maximization
P*Q equals 45*110 minus (10/100*4950) = 4455.
As a result, p=35
Q equals 128
Part b
Total cost (TC) equals total fixed costs plus total variable costs
= $495 + $2475
Total cost (TC) equals total fixed costs plus total variable costs = $495 + $2475
Part c
Total cost = total revenue at profit maximization
2950= (45*110) 2950+x=4950
when profits are maximized
X equals 2000.
P is equal to $2,000.
Quantity is 20.
Reference
Froeb, L., McCann, B., Shor, M., & Ward, M. (2014). Managerial economics (3rd Ed.). Mason, OH: South-Western Cengage Learning.
Hemel, D. J., Nou, J., & Weisbach, D. A. (2018). Appendix to’The Marginal Revenue Rule in Cost-Benefit Analysis’. Available at SSRN 3230003.
NADAR, E. N., & Vijayan, S. (2020). Managerial economics. PHI Learning Pvt. Ltd..
Naylor, T. H., Vernon, J. M., & Wertz, K. L. (2022). Managerial economics: corporate economics and strategy. McGraw-Hill.
Naylor, T. H., Vernon, J. M., & Wertz, K. L. (2022). Managerial economics: corporate economics and strategy. McGraw-Hill.
Orovwiroro, G. O., & Nwinee, B. F. (2019). Understanding the Link Between Managerial Economics, Business Strategies Formulation and Implications. International Journal of Science and Business, 3(3), 199-209.
Orovwiroro, G. O., & Nwinee, B. F. (2019). Understanding the Link Between Managerial Economics, Business Strategies Formulation and Implications. International Journal of Science and Business, 3(3), 199-209.
Rahman, M. H., & Majumder, S. C. (2021). Relationship between developing manager and managerial economics: a theoretical overview. Independent Journal of Management & Production, 12(5), 1339-1356.
Samuelson, W. F., Marks, S. G., & Zagorsky, J. L. (2021). Managerial economics. John Wiley & Sons.
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