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Dear Sir and friends,
Please help me to calculate this question on MCQAt a selling price of $200, the demand will be 100,000 unit per annum
The demand will change by 10,000 units for every $30 change in selling price
The fix cost is $60,000 per annum and the variable cost is $8 per unit
At what selling price per unit, will the profit be maximisedThank you so much
Have you not watched the free lecture on pricing?
You need to derive the price demand equation and determine the values of a and b.
Then you put the same values for a and b in the equation for marginal revenue (which is given on the formula sheet).
Then you make the marginal revenue equal to the marginal cost (which in this question is 8).That will give you the level of demand at which profit will be maximised. You can then put this figure into the price demand equation to get the selling price that maximises the profit.
You really should watch the free lectures – they cover the whole of the Paper F5 syllabus.
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