Min max: how much of the tax to absorb

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The discussion revolves around how to incorporate tax into pricing and production equations. Participants analyze the implications of passing tax costs onto consumers versus absorbing them as a firm. They emphasize that increasing the price to cover tax will likely reduce the quantity sold, necessitating adjustments in the demand equation. Key variables include the price (P), the number of items sold (x), and the cost of production (y), with a focus on how these interact under different tax absorption scenarios. The conclusion highlights the need for a clear representation of tax impacts on pricing and sales volume to optimize profit.
  • #31
Karol said:
But why:
$$\Pi\prime = x(200-0.01x) - 50x + 20,000 - 0.1x$$
i think it should be:
$$\Pi\prime = x(200-0.01x) - 50x - 20,000 - 10x$$
Yes.
It looks like @MrAnchovy suggests the only change is to include the new 10 cent tax to the cost, ##\ y\,.\ ## The quantities are all in cents and not dollars or other currency, so that should be an "extra" ##\ -10 x\ ## upon subtracting ##\ y\ ## from ##\ x P \,.##

Try it.
 
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  • #32
I tried it and it comes right:
Capture.JPG

Genius
 

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  • #33
  • #34
Karol said:
i think it should be:
$$\Pi\prime = x(200-0.01x) - 50x - 20,000 - 10x$$
You are right
SammyS said:
The quantities are all in cents and not dollars or other currency
Yes, sloppy of me to miss that, thanks!
 

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