Question

When a wholesaler sold a product at $50 per unit, sales were 184 units per week. After a price increase of $5, however, the average number of units sold dropped to 164 per week. Assuming that the demand function is linear, what price per unit will yield a maximum total revenue?

Answer 1

Answer:

$48 per unit

Step-by-step explanation:

Increasing the price by $5 reduces demand by 20 units, so the slope of the curve is -4 units per dollar. This lets us write a demand equation as ...

q = -4(p -50) +184

q = -4p + 384

q = 4(96 -p)

The revenue is the product of price and demand:

r = pq = 4p(96 -p)

This is the equation of a quadratic curve that opens downward and has zeros at p=0 and p=96. The vertex (maximum) will be halfway between the zeros, at ...

p = (0+96)/2 = 48

A price of $48 per unit will yield a maximum total revenue.