Is the prius price elastic or price inelastic how many


Tess is the product manager for the Toyota Prius. Honda has recently launched its own hybrid car which has proved to be a capable competitor to the Prius. Since the Honda launch, Tess has noticed that her sales have been slowing.

She is considering dropping her price from its current level $24,000 to a new reduced level $18,000 in order to better compete with the Honda hybrid which is priced at $18,500.

Before she does so, she wants to understand how price sensitive consumer demand is for the Toyota Prius.

At the $24,000 price, Tess has been able to sell 60,000 units per year. When the Prius was first launched, it was priced much higher at $30,000. During its first year at that price point, it sold 40,000 units.

What is the price elasticity of the Toyota Prius at the $24,000 price level? Is the Prius price elastic or price inelastic? How many units should Tess expect to sell at the $18,000 price point, assuming a linear demand curve?

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Financial Management: Is the prius price elastic or price inelastic how many
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