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. What is the (point) price elasticity of demand at the recommended lower price? 2. What is the arc price elasticity of demand between these two prices? 3. Using the concept of elasticity, how much is the price of the product that will yield the highest total revenue and 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
1. What is the (point) price elasticity of
2. What is the arc price elasticity of demand between these two prices?
3. Using the concept of elasticity, how much is the price of the product that will yield the highest total revenue and how many units of the product must the firm sell to maximize its total revenue?
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