if the price of a minivan is 40,000 find the price and quantity of a passenger car that maximizes revenue when the demand for a passenger car is characterized by the following question
Qd= 20,000 - 4P1+ 2P2
Q = 20000 - 4P1 + 2P2
P2 = price of minivan = 40000
P1 = price of passenger car
Q = 20000 - 4P1 + 2(40000)
Q = 20000 - 4P1 + 80000
= 100000 - 4P1
R = QP1
= (100000 - 4P1 )P1
= 100000P1 - 4P12
dR/dP1 = 100000 - 8P1
put dR/dP1 = 0
100000 - 8P1 = 0
100000 = 8P1
P1 = 100000/8
= 12500
d2R/dP12 = - 8 < 0
so P1 = 12500 is the revenue maximizing price
Q = 100000 - 4P1
= 100000 - 4(12500)
= 100000 - 50000
= 50000
Thus revenue maximizing price and quantity of passenger car are 12500 and 50000 respectively.
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