Question

You own a car dealership and you can now sell 50 cars per month at $28,000 per car and demand is decreasing by 2 cars per month each month. Each car costs the dealership $15,000 (wholesale cost). What is the fastest you can raise the price before your profit starts to drop?

Answer 1

Answer:

For the revenue per month to drop, the price per car per month has to rise more than $1,500.

Explanation:

R = P*Q

dR/dt = (dP/dt)Q + P(dQ/dt)

dR/dt = (dP/dt)40 + 20,000*3 > 0

(dP/dt)40 > - 60,000

dP/dt > - 1,500

Therefore, For the revenue per month to drop, the price per car per month has to rise more than $1,500.