6 Office Enterprises OE produces a line of metal office file

6) Office Enterprises (OE) produces a line of metal office file cabinets. The company’s economist, having investigated a large number of past data, has established the following equation of demand for these cabinets: Q = 10,000 + 60B – 100P + 50C where Q = Annual number of cabinets sold B = Index of nonresidential construction P = Average price per cabinet charged by OE C = Average price per cabinet charged by OE’s closest competitor It is expected that next year’s nonresidential construction index will stand at 160, OE’s average price will be $40, and the competitor’s average price will be $35. Forecast annual sales. Enter your response as a whole number without the dollar sign. What will be the new sales forecast if the competitor lowers its price to $32?

Solution

Annual sales forecast with the given data 10,000 + 60 * 160 - 100 * 40 + 50 * 35 = 17,350.

However if competitors price falls to $32 new sales forecast = 10,000 + 60 * 160 - 100 * 40 + 50 * 32 =17,200.