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Q. For most products, higher prices result in decreased demand whereas lower product prices result in an increased demand. Let

d = annual demand for a product in units

p = price per unit
Assume that a firm accepts the following price-demand relationship as being realistic:

d = 800 - 10p

where the price p must be among $20 and $70

a. Explain how many units can the firm sell at the $20 per-unit price?

b. Show the mathematical model for the total revenue (TR), which is the annual demand multiplied by the unit price (show it in the most expanded form).

c. Based on other considerations, the firm's management will only consider price alternatives of $30, $40 and $50. Use your model from part (b) to find out the price alternative that will maximize the total revenue.

d. Illustrate what are the expected annual demand and total revenue according to your recommended price?

Business Management, Management Studies

  • Category:- Business Management
  • Reference No.:- M9371337

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