Maximize total revenue, Financial Econometrics

The demand equation for Good Y is given by

            P = 900/q - 0.48q + 100       q > 0

In this question use derivatives to explore the relationship between the demand for Good Y, total revenue and elasticity.

Task

  1. Find an expression for the total revenue, TR.
  2. Find an expression for marginal revenue, MR.
  3. Find and interpret the marginal revenue when q = 60
  4. What price must be charged to achieve a demand of q = 60
  5. Find an expression for dp/dq and evaluate at q = 60
  6. Use the relationship  dp/dq = 1/dp/dq and the result of (4) and (5) to determine

     Whether the demand is elastic, unit elastic or inelastic when q = 60, and interpret  the result.

       7. Determine value of q which maximizes total revenue.

       8. What price must be charged to maximize total revenue?

      9. Complete the following table, giving the corresponding rang or value for price and quantity, and whether marginal revenue is positive, negative or zero for corresponding range or value.

Demand

 

Inelastic

 

Unit Elastic

 

Elastic

 

Price

 

 

 

Quantity

 

 

 

Marginal Revenue

 

 

 

Hints:

  • Do Not attempt to obtain an equation for dq/dp in terms of p.
  • A second derivative is required in question 7 to verify a maximum.
  • Graph TR to check/verify your algebraic answers.
Posted Date: 2/19/2013 1:22:24 AM | Location : United States







Related Discussions:- Maximize total revenue, Assignment Help, Ask Question on Maximize total revenue, Get Answer, Expert's Help, Maximize total revenue Discussions

Write discussion on Maximize total revenue
Your posts are moderated
Related Questions
I need help on few questions related to quantitative finance. Could you help me out in those.

Q. Calculate DR's quick ratio? DR has the following balances under current assets and current liabilities: Current assets $ Current liabilities

Q. Show the Quick ratio or acid test? Quick ratio = Current assets less inventories/Current liabilities (times) This ratio measures immediate solvency of a business as it re

Q. What do you meant by Overtrading? When a company is trading large volumes of sales very quickly, it may also be generating large amounts of credit sales and consequently lar

Q. Explain Moderate working capital policy? All the non-current assets and permanent asset are financed by long-term finance. The temporary fluctuating assets financed by short

Organisations involved in international trade and investment seek economic and political stability. For this reason it is prudent for those organisations to conduct a country risk

(Average inventory/Cost of sales) * 365 days Average inventory can be arrived by taking this year's and last year's inventory values and dividing by 2 - (Opening inventories

Question: (a) What do you understand by these processes? Autoregressive Distributed lag Moving Average (b) Write down an AR(2) process and a MA(1) process. (c) Calc

Prices of Calls and Puts Options the shares of Marks & Spencer a) Explain carefully why the November calls are trading at higher prices than the September calls. b) Draw a diag

How can economies of scale be a characteristics that makes for a good industry (please be specific) and what industry (besides automobiles) do you consider to be a "good industry"