Business Economics
posted by moon
One day, your father, the owner of electrical home appliance shop, obtained from a researcher the demand function for DVD players
Qd = 134  1.07Pv + 0.76Pc + 4.6Pm  2.1Pd + 5M, where Qd is the quantity of DVD players, Pv is the price of a DVD, Pc is price of VCD player , Pm is the price of a movie, Pd is the price of a DVD player, and M is income and asked you to explain the meaning of this equation.
(a) What general information can you obtain from this demand function? Try to explain to your father how he should interpret this equation.
(b) Your father wants to increase the total revenue from DVD players; do you think that you can provide him any suggestions right now? What sort of additional information, if any, is required to have a valid recommendation?
(c) On another day, your father remembered that he had kept a record of the relationship between the price and sales of DVD players during the period when a “sale” with discount prices offered was conducted in late December last year. The record indicates an elastic demand for DVD players of his shop. Therefore, he recommended a permanent discount to its price to increase the sales revenue. Do you think he can achieve his objective (please give supporting rationales)?
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