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Unit 4: Market Structure And Firm Strategy

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Microeconomics ECON212 -1504B-01
Instructor: Joseph Parisi
Unit 4- Market Structure and Firm Strategy
Amanda Kranning
December 11, 2015

After much debate, I decided to give up my full time job with an annual salary of $50,000 in order to pursue my dream of an online business selling cookbooks. However, I will continue to work part time for the next 6 months prior to my business launch. I estimate the average retail value of each cookbook will be $30 with the average cost of $20.
The equation for demand is Q = 40,000-500P
Q = number of cookbooks sold per month
P = price of my cookbooks
Cookbooks sold at $25 (Purple line)
Q = 40,000 – (500 * 25) = 27,500 cookbooks
Cookbooks sold at $35 (Red line)
Q = 40,000 – (500 * 35) = 22,500 cookbooks
The red line on the demand curve depicts the price and quantity of the cookbooks if sold at $30 apiece. Q= 40,000 – (500 *30) = 25,000 cookbooks

I 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
I am expecting to sell about 22,000 cookbooks per month online. Using the equation for total cost as follows:
Total Cost …show more content…

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