Question

A real estate developer is offering identical houses for sale for $350,000 each, and has 20 willing customers. The developer is considering lowering the price to $300,000, since at that price there would be an additional 3 customers willing to purchase houses. What would be the developer’s change in revenue from lowering the price in this way?

Answer 1

Answer:

If the company lowers the selling price, the revenues will decrease by $100,000.

Explanation:

Giving the following information:

The developer is considering lowering the price to $300,000, since at that price there would be an additional 3 customers willing to purchase houses.

Actual revenue= 350,000*20= $7,000,000

New revenue= 300,000*23= $690,000

If the company lowers the selling price, the revenues will decrease by $100,000.