In August 2015, DRB-Hicom introduced Proton Saga Plus, a new model that replaces all

previous Saga FLX models. Due to the competitive nature of the market, the Planning

Division of the company has done an analysis and estimates the linear demand function

of Proton Saga Plus as follows:

P = 40,000

-

35Q, where P is the price (in RM) of a Saga Plus car

and Q is the number of cars sold.

a.

If DRB-Hicom targeted to sell 200 cars per month, what price a Saga Plus car

would have to be charged?

b.

If DRB-Hicom set a price of RM30,00 for a car, how many Saga Plus will be

sold per month?

c.

What is the price elasticity of demand of Saga Plus if price equals RM33,000?

d.

If DRB-Hicom decides to offer a 10% discount for every car purchased, what

will happen to the sale of Saga Plus. Justify your answer.

e.

Why the Manager needs to know about elasticity of demand?