The MacMillan Books Ltd is a publisher of romance novels-nothing exotic or erotic-just stories of common people
Question:
The MacMillan Books Ltd is a publisher of romance novels-nothing exotic or erotic-just stories of common people falling in and out of love. The corporation hires an economist to determine the demand for its products. After months of hard work and submission of exorbitant bill, the analyst tells the company that the demand for the firm's novels (Qx) is given by the following equation.
Qx=12000-5000Px+ 51 +5000Pc
Where:
Px is the price charged for Macmillan novel books
I is the income per capita
Pe is the price of books from competing publishers
Using this information,
(i) Determine effects of a price increase on total revenue of the company
(4marks)
(ii) Evaluate how sales of the novels would change during a period of rising income
(4marks)
(iii) Assess the probable impact of competing publishers in rising incomes Assume that the initial values of
Px, I, and Pc are Ksh. 5, ksh. 10000, ksh. 6, respectively
(4marks)
Cost Benefit Analysis Concepts and Practice
ISBN: 978-0137002696
4th edition
Authors: Anthony Boardman, David Greenberg, Aidan Vining, David Weimer