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September 1, 2014

Homework Help: Managerial Econ

Posted by Erin on Wednesday, September 20, 2006 at 10:34am.

given the demand function Q=9-.5P how can you figure out the optimal price if the objective of the firm is to mazimize revenues?? PLEASE HELP


more a calclus question with an economics application. First, set the equation for total revenue TR. TR is simply price times quantity -- P*Q. Multiply your equation by P.

P*Q = 9P-.5P^2 = TR

Next, find the first derivitive wrt to P. TR' = 9-P. Find the P such that TR'=0. Obviously P=9. This is the revenue (not profit) maximizing price.

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