The Demand for Craftmatic Adjustable Beds Is Described by

The demand for Craftmatic Adjustable Beds is described by
Q_c = P^-1.40_cI^-0.60P^0.20_mA^0.25, where Q_c is the number of Craftmatic Adjustable Beds demanded, P_c is the price of a Craftmatic Adjustable Bed, I is per capita income, P_m is the price of a battery-powered massage pillow, and A is the advertising budget.
a.If the marginal cost of producing a Craftmatic Adjustable Bed is $200, what is the profit-maximizing price?
b.Per capita income in the United States is forecast to rise by 3% next year.How will this impact Craftmatic's sales?
c.The price of battery-powered massage pillows suddenly fell by 10%.How will this impact Craftmatic's sales?

Correct Answer:

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a.$700.
b.Demand wil...

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