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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 unitI 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.
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 UnitsSubstituting the value in Demand function
P=24-0.004(3000)
P=$12Difference= $2
Hope this helps 🙂
Also, if my answer is wrong please correct me
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