Gee’s demand for cars can be represented by P=100-Q, where P isthe price of cars ($/car) and Q is the quantity demanded(car/year). Joo’s demand for cars is represented by P=60-.8Q, andRaa’s demand for cars is given by P=60-.5Q. Thus, the aggregatedemand function is Q=2.95-4.25P. 1. Graph the market demand for subs (in the graph there shouldbe at least 1 kink), if Gee and Joo and Raa are the only consumersof cars. 2. A car maker who faces the market demand for cars (asdetermined in part a) is currently charging $75 per car. He’shoping to increase his profits by raising his price just a littlebit. Using the concept of elasticity, can you advise him as towhether or not the slightly higher price is a good idea? Hint: AG . . .
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