Homework Answers
ANSWER:
Toyota should charge the price which makes the demand unit elastic.
Therefore,
E (Q,P) = (-1.5) ( P / (150,000 - 1.5 P ) ) = -1
(-1.5) * ( ( P ) / ( 150,000 - 1.5 P ) ) = -1
DIVIDING BOTH SIDES BY -1.5
P / (150,000 - 1.5 P) = -1 / -1.5
P / ( 150,000 - 1.5 P) = 2 / 3
P = 2 * (150,000 - 1.5 P) / 3
P = ( 300,000 - 3 P ) / 3
P = 100,000 - P
P + P = 100,000
2 P = 100,000
P = 100,000 / 2
P = 50,000
The price that should be charged is $50,000.
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