- This topic has 3 replies, 2 voices, and was last updated 1 year ago by
.
- Posts
- Topics: 2
- Replies: 4
- ☆
The following price and demand combinations have been given:
P1 = 400, Q1 = 5,000
P2 = 380, Q2 = 5,500
The variable cost is a constant $80 per unit and fixed costs are $600,000 per annum.
What is the optimal price and maximum profit?i only found the solution about demand fomular, but i don’t know how to find optimal price and maximum profit :(( pls help me
The demand formula is P = a + bQ, with b = change of price/change of demand quantity b = -20/500 = -0.04
By substitution:
400 = a -0.04 (5,000) 400 = a – 200
a = 600
Hence: P = 600 – 0.04Q
MR = a + 2bQ
MR = 600 – 0.08Q
MC = 80
For profit maximisation
MR = MC 600 – 0.08Q
= 80 Q = -520/-0.08 = 6,500Again by substitution: P = 600 – 0.04 (6,500) so P =) $340
- Topics: 2
- Replies: 4
- ☆
Thank you very much, have a nice day <3
- You must be logged in to reply to this topic.