Marginal revenue as a function of *price* instead of quantity?

In summary, Mondo Inc. has estimated that they can sell 3400 of their premium espresso machine, the Caffeinator, for $900 each. However, for every $50 increase in price, they will lose 100 sales. To write q as a linear function of p, the equation q = -2p + 5200 can be used. To find the revenue R as a function of p, the equation R(p) = q(p) * p can be used, where q(p) is the linear function of p. The marginal revenue, MR, can be found by substituting q(p) in terms of p into the R(p) equation.
  • #1
glass.shards
17
0

Homework Statement


Mondo Inc. estimates that it can sell 3400 of its premium espresso machine, the Caffeinator, at a price of $900 each, but it will lose 100 sales for each $50 increase in price of the machine. Let p be the price and q be the number of machines sold.
(a) Write q as a linear function of p.
(b) Write the revenue R as a function of p, and find the marginal revenue, MR, with respect to p.

Homework Equations


This is straight out of an exam so I'm guessing it's not a typo. Isn't revenue usually a function of the quantity produced, not the price? I can solve for an equation for part a), but part b) eludes me.

The Attempt at a Solution


I got q = -2p + 5200 for a), but have no idea how to do b).

Am I reading the question wrong? Any help would be very much appreciated, thanks so much in advance! =)
 
Physics news on Phys.org
  • #2
you have a direct relation between q & p, q(p) , so should first write total revenue as

R(p) = q(p).p

then substitue for q(p) in terms of p

ie because of the direct relation, you should be able to express it in terms of either, R(q) = R (p)
 

1. What is marginal revenue?

Marginal revenue is the change in total revenue that results from selling one additional unit of a product. It can be calculated by dividing the change in total revenue by the change in quantity.

2. Why is marginal revenue important?

Marginal revenue is important because it helps businesses make decisions about pricing and production. It shows the amount of revenue gained from selling one more unit of a product, allowing businesses to determine the optimal price and quantity to maximize profits.

3. How is marginal revenue different when represented as a function of price instead of quantity?

When marginal revenue is represented as a function of price, it shows the change in revenue as a result of changing the price of a product. This allows businesses to see how much revenue is gained or lost by increasing or decreasing the price. In contrast, when marginal revenue is represented as a function of quantity, it shows the change in revenue based on the number of units sold.

4. How does marginal revenue relate to the demand curve?

The marginal revenue curve is typically downward sloping and follows the same pattern as the demand curve. This is because as the price of a product increases, consumers are willing to buy less of it, resulting in a decrease in revenue. Therefore, the marginal revenue curve can be seen as the slope of the demand curve at a specific point.

5. How can businesses use marginal revenue to maximize profits?

Businesses can use marginal revenue to determine the price and quantity that will result in the highest profits. This can be done by finding the point where marginal revenue equals marginal cost, as this is the point where profits are maximized. Alternatively, businesses can continue to produce and sell products as long as marginal revenue is greater than marginal cost, as each additional unit sold will contribute positively to profits.

Similar threads

  • Calculus and Beyond Homework Help
Replies
4
Views
1K
  • Calculus and Beyond Homework Help
Replies
7
Views
2K
  • Calculus and Beyond Homework Help
Replies
3
Views
4K
  • Calculus and Beyond Homework Help
Replies
4
Views
1K
  • Calculus and Beyond Homework Help
Replies
2
Views
1K
  • Calculus and Beyond Homework Help
Replies
25
Views
3K
  • Calculus and Beyond Homework Help
Replies
1
Views
2K
Replies
6
Views
2K
Replies
1
Views
4K
  • Calculus and Beyond Homework Help
Replies
1
Views
5K
Back
Top