In effort to reduce excess end-of-the-model-year inventory, Oaktown Ford offered a 1% discount off the average price of 4WD Escape gas-electric hybrid SUV's sold during the month of August. The response was wildly enthusiastic, with unit sales rising by 10% over the previous month's level.
1) Calculate the point price elasticity of demand for Oaktown Ford 4WD Escape gas-electric hybrid SUV's sold during the month of August.
2 )Calculate the profit-maximizing price per unit if Oaktown Ford has an average wholesale cost of $23,500. and incurs marginal selling costs of $350. per unit.© BrainMass Inc. brainmass.com October 9, 2019, 9:53 pm ad1c9bdddf
1) Point price elasticity = %change in quantity demanded / % change in price= 10%/(-1%)=-10
This solution illustrates how to arrive at the profit maximizing price and how to calculate the price elasticity of demand with calculations.