Just when you really, really want an ice cream cone, the price is rising. But it isn't summertime gouging by manfacturers. The cost of milk fat, the principal ingredient in ice cream, jumped 71% druing the past 6 months to 2.22 at the end of June. As a result, retail prices of ice cream are up 4% from last year, manfacturers say, triggering a 3% drop in comsumption. From last year to this year, what happened to the total revenue from ice cream. Explain
Total revenue is P*Q. Let P and Q be initial price and quantity. So, new total revenue will be (1.04)*P * (.97*Q) So, the change in total revenue is .....
To calculate the change in total revenue from last year to this year, we first need to understand the factors involved.
According to the given information, the price of ice cream has increased by 4% due to the rising cost of milk fat. However, the manufacturers also mention that this increase in price has led to a 3% drop in consumption.
Let's assume the initial total revenue from ice cream last year is represented by R_initial. We can calculate the new total revenue this year, given the price and quantity changes.
New Price (P_new) = 1.04 * P_initial (where P_initial is the initial price)
New Quantity (Q_new) = 0.97 * Q_initial (where Q_initial is the initial quantity)
Using the formula for total revenue:
New Total Revenue (R_new) = P_new * Q_new
= (1.04 * P_initial) * (0.97 * Q_initial)
= 1.009 * (P_initial * Q_initial)
Therefore, the new total revenue is approximately 1.009 times the initial total revenue.
To calculate the change in total revenue, we can subtract the initial total revenue from the new total revenue:
Change in Total Revenue = R_new - R_initial
= 1.009 * (P_initial * Q_initial) - R_initial
This equation represents the change in total revenue from last year to this year, taking into account the increase in price and the decrease in consumption.