11 otal Marks = 16] I. “High-Tech Hair Brush means no more bad hair days\" (Vanc
ID: 1149574 • Letter: 1
Question
11 otal Marks = 16] I. “High-Tech Hair Brush means no more bad hair days" (Vancouver Sun Newspaper, Friday, January 6, 2017, p. C2). "Beauty brands I'Oreal and Karastase want to make bad hair days a thing of the past. The two companies have teamed up with tech company Withings on a Hair Coach Brush that uses a microphone, gyroscope and other sensors to monitor accompanying a how fast and how hard a person is brushing. An t or dry. The "smart brush" has been gamering buzz at the [Consumer Electronics Show] CES tech The battery-powered brush starts collecting data when a user begins brushing. The smart brush pp recommends how to brush for optimal quality and minimal breakage and split ends. It can also take into account hair-influencing factors like heat of humidity and even discem if hair is show in Las Vegas." may seem like overkill considering the price- $270.00 Canadian. By contrast, Amazon sells (ordinary] brushes for as little as $1.50 Canadian.” Suppose that estimates for the "smart brush" suggest that at a price of $150.00 they would have North American sales of 290,000 brushes whereas at a price of $350.00, they would achieve sales of 137,000 smart brushes. Using the values provided above, and the "POINT/SLOPE" FORMULA approach demonstrated in class, determine the SLOPE and the INTERCEPT for the L'Oreal and Karastase smart brush AND the resulting Inverse and Normal Demand curves. (4 Marks) i. ii. Using the Normal Demand Curve found above, determine the Quantities Demanded if the price increases from $175.00 to $200.00 AND then the value of the Own-Price Elasticity of Demand (or the Demand Elasticity) for the L'Oreal and Karastase Hair Coach brush. (4 Marks) Carefully explain how the "sign" and the "magnitude" of the elasticity determined in part ii above would be interpreted? (2 Marks) iii. Suppose the market's INCOME increased from $60,000.00 to $70,000 and, as a result, the demand for the L'Oreal and Karastase Hair Coach Brush increased from 137,000 to 142,000, determine the value of the Income Elasticity? (4 Marks) iv. Carefully explain how the sign of the elasticity determined allows us to describe the "type" of good the L'Oreal and Karastase Hair Coach Brush is assumed to be and why. (2 Marks) v.Explanation / Answer
Answer for i
Using point/slope method to find demand curve equation.Following are the steps
Let P1=$150 & Q1=290,000 ; P2=$350 & Q2=137,000
(P-P1)/(Q-Q1)=(P1-P2)/(Q1-Q2)
(P-150)/(Q-290000)=(150-350)/(153000)
=-2/1530
1530P-229500=-2Q+580000
1530P=809500-2Q
P=52.8-2/1530Q...Normal Demand function
-765P+404750=Q....Inverse Demand function
Answer for 2
If P=175
Q=404750-765×175=404750-133875=270875
If P=200
Q=404750-765×200=404750-153000=251750
Elasticity =(Q1-Q2)/(Q1+Q2)÷(P1-P2)/(P1+P2)=(19125)/(522625)÷(-25)/(375)=-0.55
Answer for 3
This is a normal good as price increase quantity decrease for 1% increase in price quantity decreases by 0.55%
Answer for 4
Income elasticity
(137000-142000)/(279000)÷(-12000)/(132000)
-5/279÷(-1/11)=0.2
( I used the same formula for income elasticity just replace price with income)
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.