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Tha max demand for a company product M is 100K units pa. The demand will be reduced by 40 units for every 1$ inc. The company has determined that profit maxed at sales vol of 42k units pa. What is the profit maximising selling price for product M ??
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The price demand equation is P = a – 1/40Q
For maximum demand, P = 0, therefore a = 1/40 x 100,000 = 2,500Since maximum profit is when Q = 42,000, the price must be P = 2,500 – 1/40×42000 = $1,450
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