Oil Field-Tex, Inc manufactures specialty high-pressure valves for use in the oil patch. Due to all of the horizontal drilling activity, Oil Field-Tex is considering raising the price of its valves from the current average price of $2,500 per unit. It is currently selling 600 units per month, but has been working off a previous inventory buildup. Oil Field-Tex is trying to bring its quantity demanded down to its maximum output of 500 units per month. If the firm's marketing department estimates the price elasticity of demand to be -3.00 over the range of $2,500 to $3,500 per valve, what will be the new price have to be in order to bring demand in line with capacity?

Question

Quizplus · Accepted Answer

The Answer of Oil Field-Tex, Inc manufactures specialty high-pressure valves for use in the oil patch. Due to all of the horizontal drilling activity, Oil Field-Tex is considering raising the price of its valves from the current average price of $2,500 per unit. It is currently selling 600 units per month, but has been working off a previous inventory buildup. Oil Field-Tex is trying to bring its quantity demanded down to its maximum output of 500 units per month. If the firm's marketing department estimates the price elasticity of demand to be -3.00 over the range of $2,500 to $3,500 per valve, what will be the new price have to be in order to bring demand in line with capacity?

Oil Field-Tex, Inc Manufactures Specialty High-Pressure Valves for Use in the Oil