To generate a profit from its new o'Tunes service, OHaganBooks.com needs to know how the demand...

 

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To generate a profit from its new o'Tunes service, OHaganBooks.com needs to know how the demand for music albums depends on the price it charges. During the first week of the service, it was charging $7 per album and sold 500. Raising the price to $9.50 had the effect of lowering demand to 300 albums per week. a) Use the given data to model a linear demand equation. (3 points) b) Use the model in part a) to estimate the demand if the unit price were raised to $12. (2 points) c) Using the information on cost given in Question 3 above, determine which of the three prices ($7, $9.50 or $12) would result in the largest weekly profit, and the size of that profit. (10 points) To generate a profit from its new o'Tunes service, OHaganBooks.com needs to know how the demand for music albums depends on the price it charges. During the first week of the service, it was charging $7 per album and sold 500. Raising the price to $9.50 had the effect of lowering demand to 300 albums per week. a) Use the given data to model a linear demand equation. (3 points) b) Use the model in part a) to estimate the demand if the unit price were raised to $12. (2 points) c) Using the information on cost given in Question 3 above, determine which of the three prices ($7, $9.50 or $12) would result in the largest weekly profit, and the size of that profit. (10 points)