- #1
What do your "new" variables represent?Karol said:Homework Statement
View attachment 230408
View attachment 230409
Homework Equations
Minimum/Maximum occurs when the first derivative=0
The Attempt at a Solution
$$y=20,000+60x,~~P=200-Ax$$
$$N=xP-Y=200x-Ax^2-20,000-60x,~~N'=140-2Ax$$
Two variables
That leaves lots of questions (in my mind).Karol said:x is the same, items sold per week, and A is the new coefficient instead of 0.01.
A<0.01 since P must be higher now.
But maybe P=B-0.01x, i don't know.
Or may be even P=B-Ax
Right. You are raising the price by passing some of the tax on to the customer, so that should lower the number of items you sell in a week. You have to somehow represent that in an equation to solve this problem. What would be the new price on the item if you add some amount of tax T?Karol said:if P is higher x is lower
$$\left\{ \begin{array}{l} P=200-0.01x+a \\ y=(60-a)x+20,000 \end{array} \right. $$SammyS said:I suggest that A is simply the actual amount of tax passed on in the price. So it would have a range from 0 to 10 cents.
Now what should the value of ##\ a\ ## be?Karol said:##N'=2(70+a)-0.02x,~~N'=0~\rightarrow~x=100(70+a)##
Assuming that ##P## remains constant, will a positive value of ##a## result in more items sold or less? Does your equation make sense in that context?Karol said:$$\left\{ \begin{array}{l} P=200-0.01x+a \\ y=(60-a)x+20,000 \end{array} \right. $$
$$N=xP-y=...=2(70+a)x-0.01x^2-20,000$$
$$N'=2(70+a)-0.02x,~~N'=0~\rightarrow~x=100(70+a)$$
P is the price of one item. y is the cost of making x items. The question is asking how much of the tax you will add to the price and how much of it you will add to the cost. How would you represent that?Karol said:$$\left\{ \begin{array}{l} P=200-0.01x-a \\ y=(60-a)x+20,000 \end{array} \right.$$
$$N=xP-y=...=2(70-a)x-0.01x^2-20,000$$
$$N'=2(70-a)-0.02x,~~N'=0~\rightarrow~x=100(70-a)$$
It still is with 2 variables.
And i see that ##~P=200-0.01x~## represents the ability of the firm to charge the price P if x items are produced and sold. that i understand from the fact you modify this equation. why then is ##~y=50x+20,000~##? isn't it doubling the information, about the firm?
I thought ##~P=200-0.01x~## represents the readiness of the market. if it costs P then only x items will be purchased. this interpretation of mine is completely disconnected from the firm.
I am having a hard time getting from your problem set up to your answer. You can take either P or x as an independent variable. I have been trying to get you to use P as the independent variable, but I think I have only made the problem harder that way. My apologies. It seems simpler to use x. ThenKarol said:The answer to the original question, no' 7, is x=7500. If "all other features are unchanged" then x=7500.
$$\left\{ \begin{array}{l} P=200-0.01x-a \\ y=(60-a)x+20,000 \\ x=7500 \end{array} \right.$$
$$N'=0~\rightarrow~x=100(70-a)~\rightarrow~7500=100(70-a)~\rightarrow~a=-5$$
@Karol ,tnich said:I am having a hard time getting from your problem set up to your answer.
...
$$N = (P-a)x - y=...=140x-0.01x^2+20,000$$tnich said:##P = 200 - 0.01x##
##y = (50 + 10 - a)x + 20,000##
Then the net profit is ##N = (P-a)x - y## because you don't get to count the collected tax as profit.
Yes. So how much of the tax should be passed on to the customer?Karol said:a are the cents that are absorbed by the firm.
$$N = (P-a)x - y=...=140x-0.01x^2+20,000$$
a disappeared
##P = 200- 0.01x## is the demand curve, and in micro-economic theory the demand curve is the relationship between the price the firm charges and the number of units it can sell. If the firm decides to pass an amount ##a## of the tax on to the customers in the price of each unit, then it can only keep ##P-a## of the income on each unit because it has to hand the rest over to the government. So your equation in post #16 is correct (except for the sign on 20,000). What it is telling you is that it does not matter how much of the tax you charge to the customer - all values of ##a## give the same result. What does matter is the total price that you charge the customer.Karol said:##y = (50 + 10 - a)x + 20,000~## says (10-a) is absorbed by the firm. every item is more expensive to "produce" by (10-a). i shouldn't write ##~N=(P-a)x-y~## since the loss to the firm has already been taken into account in y.
So a is passed to the customer. every item is more expensive by a. if we already want to use ##~N = (P-a)x - y~## then it should be ##~N = (P+a)x - y##
But it's not logical. if ##~P=200-0.01x~## represents, as i interpret it, the forces of the market, meaning what are people ready to pay, then ##~N=xP-y~## should be changed in a different way.
I think ##~y=60x+20,000~## only, because each item is more expensive by 10. what we do later with the price we charge is an other thing.
You did not include the remaining part of the tax in the cost.Karol said:$$\left\{ \begin{array}{l} y=60x+20,000 \\ P=200-0.01x \\ N=(P-a)x-y \end{array} \right.$$
$$N=(140-a)x-0.01x^2-20,000$$
$$N'=0~\rightarrow~140-a=0.02x$$
##x = 7000 + 0a##?Karol said:I have to express x in terms of a, x=x(a)
After exchanging pm.s with @Karol , I learned that this problem comes from a textbook on Calculus and Analytic Geometry.Karol said:a are cents absorbed by the firm. P is the price presented to the customers, is what they are asked to pay
$$\left\{ \begin{array}{l} P-(10-a)=200-0.01x \\ y=(50+a)x+20,000 \\ N=xP-y \end{array}\right.
$$$$N'=0:~0.01x=80-a
$$I don't seem to get rid of a so i will use the result for the original question:
Karol has used the variable, ##\ N\ ##, to represent the profit for selling ##\ x\ ## number of items.$$\left\{ \begin{array}{l} P=200-0.01x \\ y=50x+20,000 \\ N=xP-y \end{array}\right.$$
$$N'=0:~x=7500$$
It is difficult to interpret the intent of the problem's author, and I think it is commendable that you dug deeper for the background on the problem. I would point out that in your formulation of the problem, there is nothing to prevent the firm from passing on all 10 cents of the tax per item to the customer (that is, setting ##a =0##). In that case we would end up with the original optimal solution, ##x=7,500##. That makes me wonder if your interpretation is what the author really intended.SammyS said:Therefore, I suggest that we use the following for ##\ P\ ## and ##\ y\ ##.
## P = 200 - 0.01x + (10 - a) ##
##y = 50x +20,000 +10x ##
This gives a profit function, ##\ N(x,a)\ ## with dependence on two variables.
To find critical values for min/max of a two variable function, consider where the partial derivative of each is zero or undefined or where a derivative along any of the boundaries of constraints is zero or undefined.
Good point(s).tnich said:It is difficult to interpret the intent of the problem's author, and I think it is commendable that you dug deeper for the background on the problem. I would point out that in your formulation of the problem, there is nothing to prevent the firm from passing on all 10 cents of the tax per item to the customer (that is, setting ##a =0##). In that case we would end up with the original optimal solution, ##x=7,500##. That makes me wonder if your interpretation is what the author really intended.
Yes.Karol said:But why:
$$\Pi\prime = x(200-0.01x) - 50x + 20,000 - 0.1x$$
i think it should be:
$$\Pi\prime = x(200-0.01x) - 50x - 20,000 - 10x$$
You are rightKarol said:i think it should be:
$$\Pi\prime = x(200-0.01x) - 50x - 20,000 - 10x$$
Yes, sloppy of me to miss that, thanks!SammyS said:The quantities are all in cents and not dollars or other currency
The concept of min max in regards to taxes refers to the range of options available to a government or organization when determining how much of a tax to absorb. This includes the minimum and maximum amount of tax that can be absorbed, as well as the potential consequences and trade-offs associated with each option.
Min max can impact taxpayers in various ways. If a government chooses to absorb the minimum amount of tax, taxpayers may see a decrease in their tax burden. However, if the government chooses to absorb the maximum amount of tax, taxpayers may see an increase in their tax burden or a decrease in government services.
When determining how much tax to absorb, factors such as the current economic climate, government budget, and public opinion are often considered. The government may also take into account the potential impact on different sectors of the economy and the overall welfare of its citizens.
Min max can have a significant impact on government revenue. If a government chooses to absorb more tax, it may result in a decrease in revenue. On the other hand, if the government absorbs less tax, it may result in an increase in revenue. The decision ultimately depends on the priorities and goals of the government.
Yes, the concept of min max can be applied to other areas besides taxes. It can be used in decision-making processes for various economic and social policies, such as setting minimum and maximum wages, determining the amount of subsidies to provide, and establishing price controls. It is a useful tool for analyzing potential outcomes and making informed decisions.