A company which makes lawn mowers sells 200 per month at a sales price of $1800 each. Overall the demand for lawn mowers is described by the following equation P = 2600 4Q where P is the price of lawn mowers and Q is the quantity demanded of lawn mowers. The marginal cost for making each lawn mower is $1000. The head of marketing points out that lawn mower demand is very elastic at the current price of $1800. Therefore, he recommends cutting the price in order to increase revenue and profit.

a. Compute the point price elasticity of demand at the current price of $1800. Is the marketing chief correct about elasticity?

b. Is he correct about the price suggestion? What price should they charge?