•
A given % fall in P will cause a smaller % rise in Q so that total revenue
(P times Q) falls.

A4)
Scenario 1
To find optimum price, We use the demand function
Quantity = 5024.58 -136.62(Price of oil )
+ 117.41(Price of competitor’s products) –
0.2823(Per
capita income of consumers) + 7.87 (Promotional
Expenditure of Mustard oil)
Total Revenue can be maximized at a point at which there is unit elasticity i.e. PED=1
Total Revenue =P*Q
Q= 25521.268 -136.62P
------(1)
(Here p is price of the oil, Substituted all values to
get this
equation)
Multiplying P on both sides of equation (1) to get total revenue
Total Revenue= 25521.268 P-136.62(P
2
)
First derivative of TR with respect to P
d TR/d P = 25521.268 -136.62(2P)
We know that when TR is maximum, the slope is zero, hence equalizing the above to zero
P=93.40
Hence, Price = 93.40
Competitor’s price =109.14
Income Per Capital= 7620.6015 (after 1% increase)
Promotional Expenditure = 1247.31
Total Revenue= Q*P
= 12760*93.40
= 1191873.66

Scenario 2
To find optimum price, We use the
demand
function
Quantity = 5024.58 -136.62(Price of oil )
+ 117.41(Price of competitor’s products) –
0.2823(Per
capita income of consumers) + 7.87 (Promotional
Expenditure of Mustard oil)
6% increase in the competitor’s price
Revised competitor’s price
= 115.6884 (After 6 % interest)
Q=26290.304-136.62 P
Revenue is maximized , When Elasticity with respect to price is unity or 1
Therefore,
E= slope *(P/Q)
1=136.62 *(P/Q)
P=Q / 136.62
------------(1)
Substituting the value of P in the demand equation,
2Q=26290.304
Q=13145.15
Now Substituting Q in Equation 1
P=13145.15/136.62
P=96.21
Total Revenue= Q*P
=13145.15*96.21
=1264785.75
Comparing Both the Scenario , We find increase in competitor price benefits Hind Oil as the Net
Revenue of its product Increases
Total Revenue =
1264785.75
Differential Revenue= 72,912.09
When the competitor increases the price, the company shall benefit if we decrease the
price as total revenue increases .

A5)
By considering above table of price , Quantity demanded and total Revenue ,Plotted the
demand graph and total revenue graph below:
Demand Curve
91.5
92
92.5
93
93.5
94
94.5
95
95.5
96
96.5
97
12400
12600
12800
13000
13200
13400
13600
13800
14000
14200
14400
14600
QUANTITY DEMANDED
PRICE
Quantity Demanded
Total revenue
93.40
12760
1191873
96.21
13145
1264785
Price
Quantity
Price
Quantity

Total Revenue Curve
1170000
1180000
1190000
1200000
1210000
1220000
1230000
1240000
1250000
1260000
1270000
1280000
12400
12600
12800
13000
13200
13400
13600
13800
14000
14200
14400
14600
TOTAL REVENUE
Quantity
R
e
v
e
n
u
Quantity
Revenue

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- Spring '18
- Supply And Demand, price of oil