Economics Question

[cdcengineer]

Anyone wanna try this?

A rental company owns (218) condo units which are fully occupied at rent = $940/ month.

The company estimates that for every $25 increase in rent, (5) condo units will become vacant. What rent shall be charged which will result in the maximum income per month?

I got stumped..

Thx

 

[Adrenaline]

Anyone wanna try this?
A rental company owns (218) condo units which are fully occupied at rent = $940/ month.

The company estimates that for every $25 increase in rent, (5) condo units will become vacant. What rent shall be charged which will result in the maximum income per month?

I got stumped..

Thx

You want to maximize Total rent = (218units - 5units*x) * ($940+$25*x) where x is an iteration counter

Expand

204920 + 750x - 125x^2 this is a parabola, we want to maximize this function so take its derivative and solve at 0.

-250x + 750 = 0

x=3

So you want to charge

rent = $940 + 3 * $25 = $1015

for 218 - (5*3) = 203units

Giving $206045/month

Or you can use excel and solve it by inspection.

 

[Flyer_PE]

Or you can use excel and solve it by inspection.

That would be my approach except that they wouldn't let me take my laptop into the exam room.

 

[cdcengineer]

Anyone wanna try this?
A rental company owns (218) condo units which are fully occupied at rent = $940/ month.

The company estimates that for every $25 increase in rent, (5) condo units will become vacant. What rent shall be charged which will result in the maximum income per month?

I got stumped..

Thx

You want to maximize Total rent = (218units - 5units*x) * ($940+$25*x) where x is an iteration counter

Expand

204920 + 750x - 125x^2 this is a parabola, we want to maximize this function so take its derivative and solve at 0.

-250x + 750 = 0

x=3

So you want to charge

rent = $940 + 3 * $25 = $1015

for 218 - (5*3) = 203units

Giving $206045/month

Or you can use excel and solve it by inspection.

Thanks, I was close last night, and got it by inspection. But, I knew there was an easier way. I was not solving at 0 as I could not remember this part of the equation.

Thx agn