Answered: If your marketing department estimates…

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter3: Demand Analysis

Section: Chapter Questions

Problem 1.5CE

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If your marketing department estimates that the semiannual demand for the highlander is q=150,000. - 1.5 P, what price should you charge in order to maximize revenues from the sales of highlander

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$T o m a x i m i z e r e v e n u e, o n e m u s t c h a r g e t h e p r i c e t h a t c a n m a k e i t' s d e m a n d u n i t e l a s t i c . T h u s, a p p l y i n g t h e o w n p r i c e e l a s t i c i t y o f d e m a n d f o r m u l (E) Q, P = \frac{(- 1.5) P}{150, 000 - 1.5 P} = - 1$

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