# ACCA F5 Lecture – Pricing Part 2b

1. says

thank you for the lecture, however there is something on example 6 i don’t understand the selling price was not stated either to increase or reduce

• 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.

2. says

Sir, is it also that revenue is maximised when marginal revenue = 0?

3. 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?

• 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.

4. 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.

• says

You are correct – I missed out example 3

However the free Lecture Notes (and the answer at the back) should make it clear.

5. 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

• says

If you fill in the figures for Q, a, and b, then the total revenue is 3593750 which is the same as Q x selling price (57500 x \$62.50).

Why do you say that this is not the correct total revenue?? (Are you sure you are not confusing it with the total contribution in the answer?)

• says

Sir, if a= 120, b= 0.01 and q= 57500. When I solve, I don’t still get 3593750.

• says

Sorry sir, I got it now. Was using 0.01 as b instead of 0.001.
Thanks

6. 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)

• says

As I explain in the lecture, the formula is given on the formula sheet – you do not need to be able to differentiate.

7. 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 : )

8. i notice from the examples 5 and 6 that contribution per unit is the same as “bq” from the equation (p = a – bq)

• says

Well spotted
That will always be the case at the levels of P and Q that give maximum profit.

However, don’t use that fact in the exam