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General query about pricing approach

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA PM Exams › General query about pricing approach

  • This topic has 1 reply, 2 voices, and was last updated 3 years ago by John Moffat.
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    Posts
  • October 6, 2022 at 7:24 pm #668058
    James124
    Participant
    • Topics: 166
    • Replies: 138
    • ☆☆☆

    There are two different points, profit maximization and revenue maximization. These both are calculated in different way.
    I am confused that why these point are not same? If a product have maximum revenue so it should have maximum profit at that point which is not found here. These both points are totally different.

    For example,
    A= 90
    B = 0.006
    MC= 20

    For profit maximisation:
    MR=MC so (a-2bq)=20 so q will be 5833 units.
    For revenue maximisation
    MR=0 so (a-2bq)=0 so q will be 7500 units.
    Both units are different. I am not getting the concept.

    October 7, 2022 at 10:24 am #668080
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54835
    • ☆☆☆☆☆

    The two are not the same. It is best seen by looking at the graphs that I draw in my lecture on this. Maximum revenue is at the top of the revenue curve, whereas maximum profit occurs when the extra revenue is equal to the extra cost.

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