An automobile dealer can sell 8 sedans per day at a price of $20,000 and 4 SUVs (sport utility vehicles) per day at a price of $25,000. She estimates that for each $400 decrease in price of the sedans she can sell two more per day, and for each $600 decrease in price for the SUVs she can sell one more. If each sedan costs her $16,800 and each SUV costs her $19,000, and fixed costs are $1,100 per day, what price should she charge for the sedans and the SUVs to maximize profit? [Hint: Let x be the number of $400 price decreases for sedans and y be the number of $600 price decreases for SUVs, and use the
An automobile dealer can sell 8 sedans per day at a price of $20,000 and 4 SUVs (sport utility vehicles) per day at a price of $25,000. She estimates that for each $400 decrease in price of the sedans she can sell two more per day, and for each $600 decrease in price for the SUVs she can sell one more. If each sedan costs her $16,800 and each SUV costs her $19,000, and fixed costs are $1,100 per day, what price should she charge for the sedans and the SUVs to maximize profit? [Hint: Let x be the number of $400 price decreases for sedans and y be the number of $600 price decreases for SUVs, and use the
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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An automobile dealer can sell 8 sedans per day at a
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Step 1: Determine the given variable:
VIEWStep 2: Determine the demand functions for sedans:
VIEWStep 3: Determine the demand functions for SUV:
VIEWStep 4: Determine the revenue functions:
VIEWStep 5: Determine the marginal revenue function:
VIEWStep 6: Determine profit maximizing quantity of SUV and sedans:
VIEWStep 7: Determine the profit maximizing prices:
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