The demand for
IPOD--Exercise with Survey Results:
Econ 100B, May 2, 2006
Click here to find an Excel file with
the
results from our survey on willingness to pay for an IPOD.
The file also contains results from a similar survey done in Econ 1. Using Excel is the convenient way to
work with
the data, since you can easily do the required calculations in Excel.
Here are some questions based on these results. (Hint: Your
first step should be to make a column which reports the number of
units demanded at each price. Note that if the price is say,
$100, everybody who is willing to pay $100 or more than $100 will
demand an IPOD. Now you can calculate total revenue at each
price.
Answer these questions based on the data from our class.
Then answer the same questions for the data from the Econ 1 class.
For questions 2-4, use Excel to calculate total revenues total
costs, and total profits for Apple.
1) Suppose that Apple must choose one of the prices listed in the
first column, and assume that the distribution of values in the
population at large is the same as that in the survey
results. What price should Apple set for IPODs in order to
maximize total revenue from the sale of IPODs? How many units
will it sell at that price?
2) Suppose that Apple can produce and distribute IPODs at a constant
marginal cost of $50 per IPOD and that it markets IPODs directly.
At what price would it maximize its profits? How many units will
it sell at that price?
3) Suppose that Apple can produce and distribute IPODs at a
constant
marginal cost of $100 per IPOD and that it markets IPODs
directly. At
what price would it maximize its profits? How many units will it
sell at that price?
4) (Extra credit) Suppose that Apple does not market IPODS
directly, but wholesales them to independent retailers at 80% of the
price that buyers pay. Suppose that Apple can produce and supply
IPODs to a wholesaler at a constant marginal cost of $50.
What price would maximize Apple's profits? How many units will
it sell at that price?