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Forums › Ask CIMA Tutor Forums › Ask CIMA P2 Tutor Forums › CIMA P2 Chapter 15 Test – Pricing
On Q1 it asks what the price would be if demand is 225 when:
$30 = 100 units
$27 = 150 units
The answer is $22.50 but I can’t work out why?
Hi, Thanks for your question.
if you have watched the lectures – you should be familiar with the expression:
P = a -bQ
where P is price ( which you are trying to find out)
Q is quantity – in your case 225 units.
‘a’ and ‘b’ must be calculated using the existing data which is given….
a = current price + ((current qty/ change in qty when price changes by $z) *$z)
therefore using the info given
a = 27 +(150/50)*$3)
a = 36
b = change in price / change in quantity
b = 3 / 50
b = 0.06
so the full expression here is:
P = 36 – 0.06Q
so if Q = 225
then
P = 36 – 0.06*225
P = 36 – 13.5
P = 22.5
I hope this helps ?