Web design and maintenance
Web design and maintenance: Pages: 1000 words
You are starting your own Internet business. You decide to form a company that will sell cookbooks online. Justcookbooks.com is scheduled to launch 6 months from today. You estimate that the annual cost of this business will be as follows:
Technology (Web design and maintenance)
$5,000
Postage and handling
$1,000
Miscellaneous
$3,000
Inventory of cookbooks
$2,000
Equipment
$4,000
Overhead
$1,000
You must give up your full-time job, which paid $50,000 per year, and you worked part-time for half of the year.Deliverable Length: 1 graph plus calculations
The average retail price of the cookbooks will be $30, and their average cost will be $20.
Assume that the equation for demand is Q = 40,000 – 500P, where
Q = the number of cookbooks sold per month
P = the retail price of books.
Show what the demand curve would look like if you sold the books between $25 and $35.
Address the following questions:
What is the elasticity of the demand for cookbooks bought this way?
Is the business worth pursuing so far?
Suppose that you expect to sell about 22,000 cookbooks per month online, and assume your overhead, technology, and equipment costs are fixed. What are your total costs?
What are your marginal costs?
What market structure have you entered, and why?
What can you do to guarantee success in this market?
What pricing strategy might you use?
…………………..Answer preview…………………..
The equation for demand is Q = 40,000 – 500P, where Q = the number of cookbooks sold per month and P = the retail price of books. Therefore, the elasticity of demand for cookbooks is (dQ / dP)*(P/Q). Price elasticity of demand: = (dQ / dP)*(P/Q). The price elasticity is 5/4. Since price elasticity is above 1 in absolute terms, I can say that the demand for cookbooks is elastic (Mankiw 34)………………………..
APA
1088 words
