Font Paragraph Styles Problem 6 The following table shows wo

Font Paragraph Styles Problem 6. The following table shows worldwide sales of Nokia cell phones and their average wholesale process in 2004. Fourth 105 51.4 QuarterSecond Wholesale Price (S) Sales (millions) 45.4 a) Use the data to obtain a linear demand function for (Nokia) cell phones, and use your demand equation to predict sales if Nokia lowered the price further to S103. Fill in the blanks: units. b) For every increase in price, sales of cell phones decrease by nited States

Solution

1) The linear demand function has the form q=mp + b

We have (p1,q1) = (111,45.4) and (p2, q2) = (105,51.4)

m = (51.4 - 45.4) / (105 -111) = -1

Thus q = -p+b; or 45.4 = -111 + b; or b = 156.4

Hence linear demand equation is q = -p + 156.4

When price were lowered to $103 then equation will be:

q = -103+156.4 = 53.4

Therefore when the price were reduced to $103, we could expect sales of nearly 53.4 million phones. It is consistent with the Law of Demand that states lower prices cause higher demand

2) Solution: For every $1 increase in the prices of phone, sale of cell phones decrease by 1 million units

Working: The slope can be written as m = -1/1; thus for each increase of $1 in the phone price , we can expect sales to decrease by 1 million phones.