You will be taking over the vending machine business at UNCC from Tony. You are selling 20-ounce bottles of Dasani bottled water for $1.25, and Tony will give you a large stock of Dasani to get you started. Tony says every time he raised the price by a nickel, he sold 80 less bottles per month. He experimented with the price and assures you that the current price is the one that maximize revenue (though not necessarily profit). How many bottles do you expect to sell each month? Show your work/thought process: Really maximizing revenue here, not profit, since you are given a starting stock of bottles for free. Two ways to maximize revenue: Set MR = 0 Set point elasticity=-1 The first method is blocked due to missing information. "increase price by a nickel, sell 80 less"; this is the slope or derivative dQ/dP = -80/0.05 (make sure you have it the right way) Point elasticity (dQ/dP)(P/Q) = -1 (-80/0.05)(1.25/0) (remember it says $1.25 is the price that maximizes revenue) (-1,600) (1.25/Q) = -1 -2000/Q = -1 Q = 2,000

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