In 2008 a car manufacturer sold 10,000 units of its leading model at N10,000. After deducting operating costs, dealers’ costs and all other variable cost this produced a surplus of N4,000 on each unit sold. Due to the recession, sales slump in early 2009 and the marketing director advises a price cut of N2000, arguing that this makes sense because the Own Price Elasticity of demand is –1.5. Calculate the amount of surplus that would be generated by the manufacturer in 2009 if the marketing director is correct and her recommendation is accepted.
In 2008 a car manufacturer sold 10,000 units of its leading model at N10,000. After deducting operating costs, dealers’ costs and all other variable cost this produced a surplus of N4,000 on each unit sold. Due to the recession, sales slump in early 2009 and the marketing director advises a price cut of N2000, arguing that this makes sense because the Own Price Elasticity of demand is –1.5. Calculate the amount of surplus that would be generated by the manufacturer in 2009 if the marketing director is correct and her recommendation is accepted.
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 3E
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Question
In 2008 a car manufacturer sold 10,000 units of its leading model at N10,000. After deducting operating
costs, dealers’ costs and all other variable cost this
the recession, sales slump in early 2009 and the marketing director advises a
that this makes sense because the Own
that would be generated by the manufacturer in 2009 if the marketing director is correct and her
recommendation is accepted.
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