Opportunity costs are important to be taken into consideration while evaluating business decisions for a firm. Need help with economics homework? Let us take an example of the manager working in a bookstore who is in a fix with the number of copies of a new bestseller that he must order. He believes to forecast sales accurately based on previous experience. His estimated equation is P = 24 – Q where
P= price in dollars
Q= quantity of books sold per month in hundreds
The bookstore is known to buy from the publisher at a price of $12 per issue. The following questions must be considered:
1. In case there is plenty of shelf space, how many copies of the book must the store order and how much price should they charge?
2. In case of limited shelf space and an assumption that profit made per copy on the shelf amounts $4, how much should the order quantity and price of bestseller be?
3. Consider that after having received the order for question 2 stated above, the manager finds out that the predicted sales of the bestseller were much higher than actual sales. Actual demand turns out to be P = 18 – 2Q. Now, the manager intends to return a few copies and receive a refund of $6 per book returned. How many copies must he return and consequently how many must be sold? What must the price be? Find economics homework answers below.