B.Decision-making techniques:4. Pricing decisions

This topic has 4 replies, 3 voices, and was last updated 9 years ago by Zainab.

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October 15, 2015 at 12:23 pm #276511
Zainab
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Difficulty in reaching the answer for the following question:
The demand curve for a product is expressed by the formula P=24- 0.004Q, where P is the selling price and Q is the quantity demanded per week at that price. At the current sales price of $10 per unit, demand per weekis 3,500 units.
By how much could the company raise the selling per unit in order to increase total sales revenue per week, before sales revenue per week from the product begins to go into decline?
A.$2 per unit C.$10 per unit
B.$4 per unit D.$12 per unit
October 15, 2015 at 4:12 pm #276540
John Moffat
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I really do suggest that you watch our lectures – they are a complete course for Paper F5 and cover everything you need to be able to pass the exam.
October 15, 2015 at 4:19 pm #276543
vapiano91
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Ans A $2P.U
Solution:
they are asking for max sales revenue. It is a point where MR=0
By formula, MR=a-2bQ
Thus, 0=24-2(0.004)Q
i.e. 0.008Q=24
i.e. Q=3000 Units
Substituting the value in Demand function
P=24-0.004(3000)
P=$12
Difference= $2
Hope this helps 🙂
Also, if my answer is wrong please correct me
October 15, 2015 at 6:05 pm #276557
Zainab
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The is great need to watch the lesson.
October 15, 2015 at 6:07 pm #276558
Zainab
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The explanation is helpful as i struggle to find the answer : demand function P=a-bQ which should be MR=a-2bQ.
Thank you very much.
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