Pricing

This topic has 4 replies, 3 voices, and was last updated 10 years ago by alawi sayed.

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November 1, 2015 at 9:47 pm #279985
Steven
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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 ??
November 2, 2015 at 7:15 am #280005
John Moffat
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Have you watched the free lectures on pricing? Our lectures are a complete course for Paper F5 and cover everything you need to pass the exam well.

Please do not simply set test questions and expect an answer. You must have an answer in whichever book you found the question, so please say what problem you have having with the answer!!

The price demand equation is P = a – 1/40Q
For maximum demand, P = 0, therefore a = 1/40 x 100,000 = 2,500

Since maximum profit is when Q = 42,000, the price must be P = 2,500 – 1/40×42000 = $1,450
November 2, 2015 at 8:49 pm #280143
Steven
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you are right sir – I will review the lectures once more.

Thanks
November 3, 2015 at 6:50 am #280170
John Moffat
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You are welcome 🙂
November 5, 2015 at 4:54 pm #280690
alawi sayed
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Thanks for answer Sir,

But why P=0 for the maximum demand ,

another q I have for what purpose sometime we say MR=0 and why

Thanks,
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