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    • Profile photo of John Moffat says

      In pricing questions we always assume that the price/demand relation ship is linear.

      Because of that, in this example, if the price goes up by $2 then the demand will fall by 2,000 units, but also, if the price goes down by $2 then the demand will increase by 2,000 units.

  1. Profile photo of fahim231 says

    hello sir

    I just noticed on example 6 you did not work out the formulas for total revenues or even total cost…….Does this mean you do not need these to derive at the answer? You can simply work it out from the marginal revenue = marginal cost formula?

    Thanks in advance

    • Profile photo of John Moffat says

      Although you could be asked to calculate total revenue and/or total cost, if you are simply asked to state which selling price will result in maximum profit then all you need to do is use the fact that for the optimum then it is when MR = MC.

  2. Profile photo of Rachel says

    Many thanks for these brilliant lectures. I have been studying one per evening and am finding ACCA brilliant (this is my first module) thanks to your website.

    A quick question, was example 3 of chapter 7 covering price elasticity of demand omitted from your lecture? I haven’t taken any notes on it. Probably my mistake!

    Thanks again.

  3. avatar says

    Thanks for the lecture. However, I have an issue. Going with the TR equation of TR = (A-BQ)Q, slotting in the figure of 57500 for quantity as derived, a as 120 and solving , we do not get the correct TR. Why is it so

  4. avatar says

    Good Day John,

    Must say that i am happy to be back with you again. I was successful in F2 thanks to opentuition.

    However, I am very confused with how we get the Marginal Revenue. (I did not do differentiate)

  5. avatar says

    Great lecture as always! .
    Sir i have a question. How do you see the usefulness of the price-demand equations as regards to the pricing strategies in theory and real life ?.

    Cheers : )

      • Profile photo of zahreddine says

        In example5, for instance “a reduction in selling price of $1 will result in additional sales of 100 units”. what should we do in the case where we don’t have this data?

      • Profile photo of John Moffat says

        Sorry – I completely misunderstood you :-(

        If you are required to produce the price/demand equation, then you have to be given that data in one form or another.

    • Profile photo of John Moffat says

      Neither!

      Key factor analysis and throughput accounting are only relevant when there is a limit on the resources available and several products to choose from. None of those factors are relevant here.

      Once the demand and associated selling price have been calculated, all the information is available to calculate the profit.

      • avatar says

        Sir,

        (Ex 06, when calculating contribution per annum you deduct variable cost from selling price and then deduct the fixed cost. why do we deduct both variable cost and fixed O/H to calculate the profit. please help sir

      • Profile photo of John Moffat says

        Profit is revenue less all costs.
        Contribution is revenue less variable costs.
        Profit is contribution less fixed costs.

        Variable costs are those where the total changes with the level of production. Fixed costs are those there the total stays the same for all levels of production.

    • Profile photo of John Moffat says

      The marginal revenue is the extra revenue that will be generated from selling one extra unit. Because the total revenue is a curve, the marginal revenue will fall with higher demand.

      As you will know from our Course Notes and my lecture, you cannot be asked to differentiate in the exams – it is excluded from the syllabuses throughout the ACCA exams.
      That is why the equation for the marginal revenue is given on the formula sheet.

  6. Profile photo of Mahoysam says

    Kind of having a hard time with the formulas bit of the lecture, but it is not because they are not clearly explained, I guess I just need to practice more.

    I am just surprised that as I am already taking a course somewhere else, there was no mention of these formulas on the topic of pricing, they only taught basic things plus the pricing strategies, I wonder if pricing is not that common in the exam and that’s why they didn’t go in deep as it is explained in here?

      • Profile photo of Mahoysam says

        Oh! so it is actually a common topic. I saw the formula yet there was no great explanation about it, I also came across it obviously in F2. Also there was no talk whatsoever on MC and MR and all of that. I am glad I checked here for this extra bit.

      • Profile photo of Mahoysam says

        May I ask when was it removed from the F2 syllabus? Because I took my F2 exam last December so it is not long time back, I wonder if they taught it to me while it was out of the syllabus already!!!!!

      • Profile photo of Mahoysam says

        Also I have another question and I am sorry if I am asking too many questions, but i would like to know if the price elasticity of demand is within the F5 syllabus, will I be expected to calculate the elasticity of products and so? I do have a basic idea about it from F1 and I believe I could answer a writing question on it as long as it is basic question but I am not sure if it is within the syllabus and if I am supposed to be aware of it. I am asking this because I found one question on it within my kit.

        Thank you very much and apologies for any disturbance.

      • Profile photo of Mahoysam says

        I guess I have been studying the things which are not in the syllabus and leaving the topics included in the syllabus !!!

        Thank you for all the clarifications!! 😀

    • Profile photo of John Moffat says

      Cost plus pricing (full cost + and marginal cost +) is in the syllabus and is (of course) covered in our notes and lectures on here.
      (It is more of a policy than a strategy, but that does not really matter.

  7. Profile photo of mustapo says

    I really enjoyed the lecture and the lecturer’s way of explanaing things but still want a detail explanations on Price elasticity of demand. The ones you taught were well understood. Thanks.

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