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Calculation of 'a' (P = a-bQ)

This topic has 4 replies, 3 voices, and was last updated 8 years ago by jdeally.

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September 6, 2017 at 5:33 pm #406116
jdeally
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- Topics: 15
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Hi John
This question drove me nuts today! How is ‘a’ calculated if all you have is b=0.0004 & Maximum Demand is 1,000,000. There was no mention of existing selling price and corresponding demand. Thanks.
September 6, 2017 at 6:07 pm #406144
marcinkarpinski
Member
- Topics: 2
- Replies: 1
Maximum demand is when Price=0
P=0
a=0.0004
Q=1000000
P=a-bQ
0=a-(0.004*1000000)
0=a-400
a=400
September 6, 2017 at 8:59 pm #406213
mika84
Member
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But then what is the need for information about cost calculation?I mean information for marginal cost calculation.
September 6, 2017 at 9:02 pm #406214
mika84
Member
- Topics: 99
- Replies: 149
I suppose, this is for 1 mln demand,and we need further calculations as usual, find q, then find profit maximising price?
September 6, 2017 at 9:26 pm #406224
jdeally
Member
- Topics: 15
- Replies: 19
I did use the 400 as outlined above, and after working out variable cost, i plugged it into MC=MR=a-2bQ formula. I can’t remember what my optimum price and demand worked out as though.
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