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raid says

Hello there, Mr. Moffat, I got a question related to the test that is at the end of chapter 7.

Question 1 asks about the selling price of the product, my answer was as follows:

10+8+3+5=26*120%=31.2 which gives the answer C. My answer was based on the assumption that it’s profit margin, since the company wishes to make a gross profit margin of 20%.

But in the answers behind, your solution was based on the assumption as if it’s a mark up which gives the answer B!

Could you please explain how did you reach to that assumption?

John Moffat says

In future it is better if you ask this sort of question in the Ask the Tutor Forum rather than as a comment on a lecture.

The answer is correct.

A gross profit margin of 20% means that the profit is 20% of the selling price (and therefore the cost is 80% of the selling price).

What you are doing it treating it as though it is a mark-up of 20% which would mean the profit was 20% of cost.

It will help you to watch the Paper F3 lecture on mark-ups and margins.

raid says

Got it, thanks Mr. Moffat.

sunday says

Is understood. Thanks

Jonny says

In example 6 where you work out the 1st equation to get P=120 – 0.001Q I dont not understand why, in the next step, to calculate Maximum profit, you then set out the equation as 120 – 0.002 = 5.

Why 0.002 when in the previous equation b = 0.001?

John Moffat says

Because it is the marginal revenue equation. I do explain this in the lecture, and also the formula is given on the formula sheet.

aliimranacca007 says

i need lecture for price elasticity of demand,,because i enjoy your lecture too much ..i hate BPP text book.

John Moffat says

I probably will record a lecture – but only when I have the time.

However it is explained well in the lecture notes (and the lectures and the lecture notes go together – using just one or the other is no good)

desola says

thank you very much sir, am preparing for f5 september 2015 diet and i realy find your lectures helpful. please do i need to still use my bpp exam kit as the kit is too bulky and i go to work everyday or can i just use open tution lecture note and will be sure of passing brilliantly by Gods grace.

John Moffat says

You must use your Revision Kit because it is vital to practice as many exam standard questions as possible.

The lectures will give you the knowledge you need, but you need the Revision Kit for practice.

aliimranacca007 says

Dear sir why you not explain price elasticity of demand?

Josephat says

love it, thank you for the lectures.

John Moffat says

I am pleased that you like them

oni 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

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.

vttrang says

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

Thanks in advance.

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

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.

amg says

Very useful ! Thanks a lot

abdul says

Excellent lecture being given.thank you

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.

John Moffat says

You are correct – I missed out example 3

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

Rachel says

Thank you, John

kangwajk says

Thanx so much for a very elaborate lecture

ifeoma 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

John Moffat 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?)

ifeoma says

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

ifeoma says

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

Thanks

Kerri - Ann 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)

John Moffat says

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

cris 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 : )

richardrobinson50 says

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

John Moffat 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

sunday says

Thanks alot.

John Moffat says

You are welcome – I am please you are finding the lectures useful

ayeodele says

very understandable thank sir

Samoar says

A tonne of thanks , sir!