Seasons Four Equipment Corporation sells 200 riding lawn mowers per month at a sales price of $1,800 each. Overall, mower demand is described by the price equation: P = 2,600 - 4Q, where P is the price of a mower and Q is the quantity of mowers demanded. The firm's estimated marginal cost is $1,000 per mower. The head of marketing points out that mower demand is quite elastic at the current $1,800 price. Therefore, he recommends cutting price in order to increase revenue and profit. Compute the point price elasticity for mower. Is the marketing chief correct?

Question

Quizplus · Accepted Answer

The Answer of Seasons Four Equipment Corporation sells 200 riding lawn mowers per month at a sales price of $1,800 each. Overall, mower demand is described by the price equation: P = 2,600 - 4Q, where P is the price of a mower and Q is the quantity of mowers demanded. The firm's estimated marginal cost is $1,000 per mower. The head of marketing points out that mower demand is quite elastic at the current $1,800 price. Therefore, he recommends cutting price in order to increase revenue and profit. Compute the point price elasticity for mower. Is the marketing chief correct?

Seasons Four Equipment Corporation Sells 200 Riding Lawn Mowers Per