Problema Solution
An automobile is selling cars at a price of $12,000. The demand function is D(p)=2(15-.001p)^2 where p is the price of a car. Should the dealer raise or lower the price to increase revenue?
Answer provided by our tutors
Click here to see the graph of the function y=(15-0.001x)^2
We notice that the function y=(15-0.001x)^2 is decreasing when x is increasing.
The same goes for the function y=2(15-0.001x)^2
Thus the dealer should lowers the price the increase the revenue.
Another way of solving the problem is by calculating D(12,000) and D(10,000) and comparing them:
D(12,000) = 18 (
click here to see the calculation
)
D(10,000) = 50 (
click here to see the calculation
)
We notice that by lowering the price the demand is growing thus the revenue will increase.