Office Enterprises (OE) produces a line of metal office file cabinets. The compa

Question

Office Enterprises (OE) produces a line of metal office file cabinets. The company's economist, having investigated a large number of past data, has established the following equation of demand for these cabinets: Q = 10, 000 + 60B - 100P + 50C where Q = Annual number of cabinets sold B = Index of nonresidential construction P = Average price per cabinet charged by OE C = Average price per cabinet charged by CE's closest competitor It is expected that next year's nonresidential construction index will stand at 160. OE's average price will be $40, and the competitor's average price will be $35. Forecast annual sales. Enter your response as a whole number without the dollar sign. What will be the new sales forecast if the competitor lowers its price to $32?

Explanation / Answer

(8)

Forecast sales = 10,000 + (60 x 160) - (100 x 40) + (50 x 32) = 10,000 + 9,600 - 4,000 + 1,600 = 17,200

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