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?

Question

Business

Gwendolyn Johnson

5 May, 10:04

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?

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Answers (1)

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Kaylee Gross · Answer 1

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.