Compute the demand equations also find out the Marginal capacity cost, optimal capacity.
A business faces equal time periods of peak and off-peak demand for its service as given by the following:
P1 = 25 - .02Q1
P2 = 15 - .01Q2
The business faces marginal operation costs of $1.00 per unit. The business also faces a capacity constraint such that it must incur a $2.50 per-unit cost to expand capacity.
Assume that capacity costs are shared by peak and off-peak users. Derive the optimal capacity and prices charged to peak and off-peak users.
Capacity costs are shared by peak and off-peak users