price elasticity

Revised on 6-15-2023 Largo Global Inc. is a fictious firm that is will be used to allow you to understand the market forces of supply and de company as well as the industry in which the company operates. The company produces two types of boxes box. These boxes are also produced by many other companies. In Project 2, you will learn about how to apply the tenets of microeconomics to improve the company’s profitability. In instructions, you will chart the supply and demand curves for the two different boxes. In tab 2 you will focus on the pr for these two products. In tab 3 you will determine at what price the company can maximize the profitability of both b Project 2 is the team assignment in MBA 620. Follow these steps to complete the project: 1. In step 3 the team will complete their Team Agreement and Work Plan and submit it to their faculty date noted by their faculty member. 1. In step 4, the team will complete this Excel file by answering the questions for all three tabs in the b member of the team will submit this file to the Project 2 Milestone assignment folder by the stated due date to re faculty member. Upon receipt of the feedback, the team will coordinate any necessary corrections. 2. In step 5, each team member must answer all questions for two of the five topics provided in the W questions constitute the core of your team’s report. Each team member will serve as the team’s primary respondent f and coordinate the answers for that topic. Each team member will also serve as the secondary respondent to one of t submit their answers to the primary respondent. a. The faculty member will create a separate Team Project 2 Discussion forum for eac all five topics. All team members should prepare their answers to the questions for their two chosen topics as separat should post their two files in the appropriate topics in the Team Project 2 Discussion forum. b. After coordinating with the other members of the team, the primary respondent fo their answers to the editor of the team’s Word file. The editor will then consolidate the answers to the questions for Word file and submit that file along with the team’s revised Excel file to the Project 2 Final assignment folder. c. If the team does not receive a grade of Meets Requirements or Exceeds Requireme respondents will coordinate any necessary changes to the answers for their topic questions and resubmit them to the then consolidate all changes to the Word file and resubmit the file along with the team’s Excel file to the Project 2 Fin nderstand the market forces of supply and demand a s they impact a ompany produces two types of boxes , a Standard box and a Deluxe mics to improve the company’s profitability. In tab 1 after reading the fferent boxes. In tab 2 you will focus on the price elasticity of demand mpany can maximize the profitability of both boxes. mplete the project: nt and Work Plan and submit it to their faculty member by the due wering the questions for all three tabs in the boxes provided. One by the stated due date to receive feedback from their any necessary corrections. ns for two of the five topics provided in the Word file. These will serve as the team’s primary respondent for one of the five topics erve as the secondary respondent to one of the five to pics and arate Team Project 2 Discussion forum for each team which includes estions for their two chosen topics as separate Word files. They 2 Discussion forum. mbers of the team, the primary respondent for each topic will submit consolidate the answers to the questions for all five topics in a single the Project 2 Final assignment folder. Meets Requirements or Exceeds Requirements, the primary heir topic questions and resubmit them to the editor. The editor will with the team’s Excel file to the Project 2 Final a ssignment folder. Note: You can find the approximate equilibrium point (intersection point) through the supply and demand curves o Table 1 Future Supply and Demand for Standard boxes Price per box Daily US demand of Daily US supply of Standard boxes (in Standard boxes (in billions of boxes per day) billions of boxes per day) $17.00 2 0.1 $17.20 1.8 0.2 $17.40 1.6 0.3 $17.60 1.4 0.4 $17.80 1.2 0.5 $18.00 1 0.6 $18.20 0.8 0.7 $18.40 0.6 0.8 $18.60 0.4 0.9 $18.80 0.2 1 $19.00 0.1 1.1 Question 1: Create a Supply and Demand Chart for the Standard box below 1. Based on the information for the number of Standard boxes in produce. After you have examined . Note: rounding errors are acceptable. Equilibrium: Table 2 Future Supply and Demand for Deluxe boxes Price per box Daily US demand of Daily US supply of Deluxe Deluxe boxes (in billions boxes (in billions of of boxes per day) boxes per day) $25.00 2 0.3 $25.50 1.8 0.4 $26.00 1.6 0.5 $26.50 1.4 0.6 $27.00 1.2 0.7 $27.50 1 0.8 $28.00 0.8 0.9 $28.50 0.6 1 $29.00 0.4 1.1 $29.50 0.2 1.2 $30.00 0.1 1.3 Question 2: 2. Based on the information for the produce. After Create a Supply and Demand Chart for the deluxe box below Equilibrium: Equilibrium: Note: rounding error is acceptable. Based on the information provided in Table 1, create a chart in the space below showing the supply and demand curves number of Standard boxes in the United States per day. This information is helpful in knowing how many duce. After you have examined the graph below, identify the price and quantity at which market equilibrium exists 2. Based on the information provided in Table 2, create a chart in the space below showing the supply and demand curves for the number of Deluxe boxes in the United States per day. This information is helpful in knowing how many produce. After you have examined the graph below, identify the price and quantity at which market equilibrium exists pply and demand curves g how many boxes to arket equilibrium exists. e supply and demand curves owing how many boxes to market equilibrium exists. 1. Last month the company sold 10 million of their Standard boxes at an average price of $18.00 per box. week the company raised the average price to $18.40 per box. The company sold 9.5 million boxes for the month. The variable cost per unit is $10 and the fixed costs are $10 million per month. Assume these costs don’t change in the short term. What is the price elasticity of demand? Can the demand be characterized as price elastic, price inelastic, or neither? By how much did revenues increase or decrease as a result of the change in price? By how much did profits increase or decline? 2. After reviewing last month’s results, the company decided to lower the price of a Standard box to $17.60. After this change, the volume sold increased to 10.5 million boxes for the month. What is the price elasticity of demand? Can the demand be characterized as price elastic, price inelastic, or neither? By how much did revenues increase or decrease as a result of the change in price? By how much did profits increase or decline? 3. Last month the company sold 1.55 million Deluxe boxes at an average price of $28 per box. This month the company raised the price to $29 and sold 1.35 million boxes. The variable cost per unit is $20 and the fixed costs are $3 million per month. Assume these costs don’t change in the short term. What is the price elasticity of demand? Can the demand be characterized as price elastic, price inelastic, or neither? By how much did revenues increase or decrease as a result of the change in price? By how much did revenues increase or decrease as a result of the change in price? By how much did profits increase or decline? 4. After reviewing the last results, the company decided to lower the price to $27 and sold 1.65 million boxes for the month. What is the price elasticity of demand? Can the demand be characterized as price elastic, price inelastic, or neither? By how much did revenues increase or decrease as a result of the change in price? By how much did profits increase or decline? Select One Price Elastic Price Inelastic Unit Price Elastic $18.00 per box. This lion boxes for the Assume these costs dard box to $17.60. This month nit is $20 and the Price Elasticity Quantity 10 % change Price 18.00 Original New % change Elasticity of Demand Elasticity: By how much did revenues increase or decrease as a result of the change in price? By how much did profits increase or decline? Standard Boxes sold per monthly (millions) 10 $ Quantity Price 18.00 Revenue (millions) $ Variable Cost per Standard box 180 $ Variable Cost (millions) 10.00 $ 100 Price Original New % change % change Elasticity of Demand Elasticity: By how much did revenues increase or decrease as a result of the change in price? By how much did profits increase or decline? Standard Boxes sold per month (millions) Price Quantity Price Revenue (millions) Original New % change % change Elasticity of Demand Variable Cost per Standard box Variable Cost (millions) ld 1.65 million boxes Elasticity: By how much did revenues increase or decrease as a result of the change in price? By how much did profits increase or decline? Deluxe boxes sold per month (millions) Price Quantity Price Revenue (millions) Variable Cost per Deluxe box Variable Cost (millions) Original New % change % change Elasticity of Demand Elasticity: By how much did revenues increase or decrease as a result of the change in price? By how much did profits increase or decline? Deluxe boxes sold per month (millions) Price Revenue (millions) Variable Cost per Deluxe box Variable Cost (millions) Fixed cost per month (millions) $ 10 $ Fixed cost per month Total Cost (millions) Monthly Profit (millions) 110 $ Total Cost (Millions) 70 Monthly Profit (millions) Fixed cost per month Total Cost (Millions) Monthly Profit (millions) Fixed cost per month Total Cost (Millions) Monthly Profit (millions) 1. The company views its goal as profit maximization. Complete the table to the right to approximate the profit-maximizing price for the Standard boxes. What is the closest price that will help the company maximize the profit on Standard boxes? 2. The company views its goal as profit maximization. Complete the table to the right to approximate the profit-maximizing price for the Deluxe boxes. What is the closest price that will help the company maximize the profit on Deluxe boxes? Profit Maximization Standard boxes sold per month (millions) 5 5.5 6 6.5 7 7.5 8 8.5 9 9.5 10 10.5 11 11.5 12 12.5 13 13.5 14 Price $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ Revenue (price x Variable Cost per volume) Standard box 22.00 $ 21.60 21.20 20.80 20.40 20.00 19.60 19.20 18.80 18.40 18.00 17.60 17.20 16.80 16.40 16.00 15.60 15.20 14.80 110.00 $ Variable Cost (cost per unit x volume) 10.00 $ 50.00 andard boxes? Profit Maximization Deluxe boxes sold per month (millions) 1 1.2 1.35 1.5 1.55 1.6 1.65 1.7 1.75 Price $ $ $ $ $ $ $ $ $ 30.00 29.50 29.00 28.50 28.00 27.50 27.00 26.50 26.00 Revenue (price x Variable Cost per volume) Deluxe box $ 30.00 $ 20.00 Variable Cost (cost per unit x volume) luxe boxes? 1.8 1.85 1.9 1.95 2 2.05 2.1 2.15 2.2 2.25 $ $ $ $ $ $ $ $ $ $ 25.50 25.00 24.50 24.00 23.50 23.00 22.50 22.00 21.50 21.00 mization Fixed cost per Total Cost (Fixed + month (millions) Variable) $ 10.00000 $ Monthly Profit (revenue – all costs) 60.0000 $ MR MC MR MC 50.00 mization Fixed cost per Total Cost (Fixed + month (millions) Variable) $ 3.00000 Monthly Profit (revenue – all costs)

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