Question

You need to determine the profit maximizing price for a video game console. Currently you charge $180 and sell 2 million per year. It costs $150 to produce a console, and the price elasticity of demand for consoles is -3. What price should you charge for a console? (assume a linear demand curve)

*******************Answer for part 1 is the maximizing price for a console is 195 is just so you can understand part 2 on what I actually need help**************

Question: you know the profit maximizing price for a console. Now assume that, on average. a purchaser of your video game console buys 10 video games, and you earn $10 profit on each video game. What is the correct price for consoles?

Answer 1

Answer : Profit = Revenue - Cost

Here per console profit = $10 and per console cost = $150.

Now, per console profit = Per console revenue - Per console cost.

=> 10 = Per console revenue - 150

=> Per console revenue = 10 + 150

=> Per console revenue = $160

We know that,

Price of one unit = Revenue from one unit

So, here when profit is $10 per console then the revenue of one console is $160. This means that the price of one console is $160. Therefore, here the correct price of console is $160.

Answer 2

The final answer needs to be less than $150 because of additional profits.  This answer is not right!