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Vision (PM 12/06, amended)

Aaccastudf510y ago
Hi, I am struggling to understand how BPP authors have calculated the profit for Birdcam-V. The text is: "The marketing director has estimated that at a selling price of $600 per unit, a total of 85,000 units p.a. would be sold during y/e 30 Nov 20x7 and that each increase/decrease in the selling price of $10 will cause quantity demanded to decrease/increase by 1,000 units. The variable cost per unit is expected to remain constant at $180. [...] The directors have agreed to adopt the combination of selling price and output that will maximize profit earned from sales of the Birdcam-V." I understand Step 1 where they use demand equation to calculate the price at which demand is zero. P=a-bx => 600=10/1,000*85,000 => a = 1450 Step 2 is substitute a into P=a-bx => P=1450-0.01x However I don't understand the following steps. At Step 3 they derive marginal revenue as MR=1450-0.02x. Where is this 0.02 coming from? Thank you for your help! Irina
kengarrettkengarrettTutor10y ago#1
If P = a - bx then MR = a-2bx. This is just a standard result arising from the mathematical process of differentiation. Whenever needed ACCA provide a formula to alloy to go from P to MR and it would have been provided somewhere with the real exam paper. [differentiation is not on your syllabus, but in case you are interested: P = a - bx R = Px = ax - bx^2 MR = dR/dx = a - 2bx As I say you don't need to know this step] [You dont need to know how
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