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The Manager of Arbor,Inc

question 84

Essay

The manager of Arbor,Inc.is considering raising its current price of $50 per unit by 10%.If she does so,she estimates that demand will decrease by 30,000 units per month.Arbor currently sells 100,000 units per month,each of which costs $35 in variable costs.Fixed costs are $1,200,000.
a.What is the current profit?
b.What is the current break-even point in units?
c.If the manager raises the price,what will profit be?
d.If the manager raises the price,what will be the new break-even point in units?
e.Assume the manager does not know how much demand will drop if the price increases.By how much would demand have to drop before the manager would not want to implement the price increase?

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Definitions:

Supply

The overall quantity of a particular product or service that is accessible to buyers.

Demand

The desire and ability of consumers to purchase a good or service at a given price.

Price

The amount of money required to purchase a good, service, or resource.

Quantity

Quantity refers to the amount or number of units of a product or service available or demanded in the market.

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