Ohorongo (Pty) Ltd. is one of the first of Namibia's cement manufacturers and owns one of the most modern cement plants in Africa. It was constructed over the course of two years by leading international engineering company Polysius, with local companies involved in the provision of infrastructure and the building of civil works, at a total initial investment of N$2.5 billion. Since then, the company invested further into a composite cement plant and a third packaging line, and a new depot in Ondangwa, bringing the total investment to date more than N$3 billion. Ohorongo commenced production in December 2010 and has a current production capacity more than a million tonnes of high-quality cement annually, for both local consumption and special projects. All raw materials required for the production process are sourced in Namibia and the entire value chain takes place within the country, which makes Ohorongo products a 100% proudly Namibian product. As a result many competitors have already started manufacturing similar products, the profits of Ohorongo (Pty) Ltd. have declined. Ohorongo (Pty) Ltd. is reviewing its pricing policy for it to remain competitive. A research conducted in line with the proposed new pricing policy reviewed that for every N$2 decrease in price, demand would be expected to increase by 5 000 bags, with maximum demand for cement being one million bags.Each bag of cement is currently made using 500 grams at N$0.10 per gram of material A and 300 grams at N$0.50 per gram of material B. 20 minutes of machine time are required to manufacture each bag of cement and the variable running costs for machine time are N$6 per hour. The fixed production overhead cost is expected to be N$2 per bag for the period, based on a normal budgeted production level of 250 000 bags. The employees possessing the skill to make cement have since been moved to another cement project being developed by the new plant of Ohorongo (Pty) Ltd. Since this new development is a million-dollar project, Ohorongo (Pty) Ltd. has since hired new staff who have never worked with cement before and will be paid $18 per hour. These staff will produce cement into the foreseeable future. Experience has shown there will be a significant learning curve involved in making cement as it is extremely difficult to handle. The first bags of cement using the new staff took 5 hours to make. However, it is believed that an 80% learning curve exists, in relation to production of the cement, and this will continue until the first 1 000 bags have been completed. Ohorongo (Pty) Ltd. management has said that any pricing decisions about cement should be based on the time it takes to make the 1 000th bag of the cement

Find the value of a in the demand function, P = a – bx, where P = price and x = quantity

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To find the value of a in the demand function P a bx where P price and x quantity we can use the fol... View the full answer