The manager of a sole distributorship for a famous brand of automobiles was discussing with the assistant manager the planned introduction by mid-year of a new model, the XP-60. It was decided earlier that the price be set at P400,000, at which level the total number of units sold was estimated at 500 units annually. The assistant manager has suggested that the price should be set at a somewhat lower level, say, at P360,000 to attract a major segment of the non-targeted market. At this lower price, 1,000 units are expected to be sold. 1. Will total revenue increase or decrease as a result of the decision to reduce the price? If so, by how much? a. Increase by P 160M b. Decrease by P 80,000 c. Decrease by P 160M d. Increase by P 80,000 2. Using the concept of elasticity, how much is the price of the product that will yield the highest total revenue? 3. Using the concept of elasticity, how many units of the product must the firm sell to maximize its total revenue?
The manager of a sole distributorship for a famous brand of automobiles was discussing with the assistant manager the planned introduction by mid-year of a new model, the XP-60. It was decided earlier that the price be set at P400,000, at which level the total number of units sold was estimated at 500 units annually. The assistant manager has suggested that the price should be set at a somewhat lower level, say, at P360,000 to attract a major segment of the non-targeted market. At this lower price, 1,000 units are expected to be sold. 1. Will total revenue increase or decrease as a result of the decision to reduce the price? If so, by how much? a. Increase by P 160M b. Decrease by P 80,000 c. Decrease by P 160M d. Increase by P 80,000 2. Using the concept of elasticity, how much is the price of the product that will yield the highest total revenue? 3. Using the concept of elasticity, how many units of the product must the firm sell to maximize its total revenue?
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
Chapter5: Business And Economic Forecasting
Section: Chapter Questions
Problem 6E: The economic analysis division of Mapco Enterprises has estimated the demand function for its line...
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The manager of a sole distributorship for a famous brand of automobiles was discussing with the assistant manager the planned introduction by mid-year of a new model, the XP-60. It was decided earlier that the
1. Will total revenue increase or decrease as a result of the decision to reduce the price? If so, by how much?
a. Increase by P 160M
b. Decrease by P 80,000
c. Decrease by P 160M
d. Increase by P 80,000
2. Using the concept of elasticity, how much is the price of the product that will yield the highest total revenue?
3. Using the concept of elasticity, how many units of the product must the firm sell to maximize its total revenue?
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