Assume that Tesla produces two models of electric car: Tesla's Division X produces

model "x" and Division Z produces model "z".Each car costs c per car to produce.

a)Should Tesla price the models so that *+ (,

and Ez are the elasticities of demand for models X and Z respectively, Px is the

price of X, and Pz is the price of Z.)If these markup formulas should not be

used, explain intuitively why not and whether you think the markups should be

larger or smaller than the inverse elasticities.

b)Optional Challenge Problem.Derive an exact markup formula for models X

and Z assuming that demand for model X is given by X(Px,Pz) and demand for

model Z is given by Z(Px,Pz)