Maximizing Revenue
Performing marginal analyses enables managers to find the right combination of price and measure that maximizes proceeds without trial and error. This is done using calculus, but the impression is straightforward. Both insignificant revenue and insignificant costs can be graphed to a curve, called the in significant or marginal function. The curve uses price as the self-determining variable on the Y axis and amount as the dependent variable on the X axis. Marginal revenue (or cost) is maximizing when the curve reaches its maximum point.
At the curve's maximum point, its grade equals zero. At that point, calculus lends that the first unoriginal of the function of the curve also generation to zero. Thus you can find marginal proceeds by taking the first imitative of the total proceeds function and solving for the measure, which made insignificant proceeds equal to zero. For example:
If total revenue/ proceeds (TR) = 120Q - 3Q2
where Q is quantity sold, and
TR = P * Q,
then
Marginal revenue (MR) = 120 - 6Q
and marginal or insignificant revenue would be optimized where
120 - 6Q = 0,
or
Q = 20