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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA PM Exams › Price demand equation
The objective of setting an Optimum Selling Price is to earn Maximum Profit:
From the Tabular approach we charge $15 selling price because it is where we have max profit;
From the Price/Demand equation approach, we calculate Price as per demand level which tells us that the lower the price gets the more the demand will be. The lowest possible price is 0 and therefore that is the price at which the demand will be at maximum but it would earn no revenue at SP of zero
However, if we charge maximum possible price then it is the price at which the demand will be at minimum.
We assume that price & demand have a linear relationship. It is regard to the fact that when price increases the quantity demanded falls.
Is it all accurate?
Yes it is accurate (and it what I state in my free lectures 🙂 )