The manager of a sole distributorship for a famous brand of automobiles was discussing with the assistant manager the planned introduction by mid-year of a new model, the XP-60. It was decided earlier that the price be set at P400,000, at which level the total number of units sold was estimated at 500 units annually. The assistant manager has suggested that the price should be set at a somewhat lower level, say, at P360,000 to attract a major segment of the non-targeted market. At this lower price, 1,000 units are expected to be sold. For 10 points, you are required to turn in a copy of your solution and graphical illustration for this activity in the Google Classroom.

1.What is the firm's price function of demand for the product given the estimates and projections made?*

P = 440000 - 0.0125Q

P = 440000 - 80Q

Q = 5500 - 80P

Q = 5500 - 0.0125P

2.What is the total revenue (TR) function?*

TR = 5500P - 0.0125(P^2)

TR = 440000Q - 80(Q^2)

TR = 5500P - 80(P^2)

TR = 440000Q - 0.0125(Q^2)

3.What is the marginal revenue (MR) function?*

MR = 5500 - 0.025P

MR = 5500 - 160P

MR = 440000 - 160Q

MR = 440000 - 0.025Q

4.What is the marginal revenue at the originally proposed price? (Use whole number, no currency, no comma, no space)*

5.What is the marginal revenue at the recommended lower price? (Use a whole number, no currency, no comma, no space)*

6.Will total revenue increase or decrease as a result of the decision to reduce the price? If so, by how much?*

Increase by P 160M

Decrease by P 80,000

Increase by P 80,000

Decrease by P 160M

7.What is the point price elasticity of demand at the recommended lower price?*

-4.5

-0.833

-10

-6.33

8.What is the arc price elasticity of demand between these two prices?*

-10

-4.5

-6.33

-0.833

9.Using the concept of elasticity, how much is the price of the product that will yield the highest total revenue?(Use a whole number, no currency, no comma, no space)*

10.Using the concept of elasticity, how many units of the product must the firm sell to maximize its total revenue? (Use a whole number, no currency, no comma, no space)*