Demand, revenue, cost & profit - Derivative Applications

Demand, revenue, cost & profit

Lessons

Notes:
Demand is the relationship between the price of an item and the number of units that will sell at that price. In other words,
Demand →p(q) p(q)
where p is the price and q is the number of quantity. Usually, p(q)p(q) is expressed as the equation
p=mq+bp = mq+b

Revenue is the amount of income a company makes. The revenue function is expressed as
R=pqR=pq
When you know what the demand is, then you can express RR as a function in terms of qq.

Cost is the amount of money a company needs to produce the items they are selling. It is usually expressed as C(q)C(q).

Profit is the net amount a company makes. It can be calculated by subtracting revenue from cost. In other words,
P(q)=R(q)C(q)P(q)=R(q)-C(q)
  • 1.
    Demand, Revenue, Cost & Profit Overview:
  • 2.
    Finding the Demand, Revenue, Cost and Profit Functions
    Desmond’s Laptop Company is selling laptops at a price of $400 each. They estimate that they would be able to sell 200 units. For every $10 dollars increase in price, the demand for the laptops will decrease 30 units. Assume that the fixed cost of production is $42500 and each laptop costs $50 to produce.
  • 3.
    Patsy is selling phones at a price of $700 each. They estimate that they would be able to sell 1000 units. For every $1 dollars decrease in price, the demand for the phones will increase by 50 units. Assume that the fixed costs of production are $300000 and each phone costs $200 to produce.
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Demand, revenue, cost & profit

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