our price effect outweighs the quantity effect, hence causing an increase in the total
revenue for the company.
if we increase prices, the revenue gained from the higher price will outweigh
the revenue lost from less units sold.
Q4. What is optimum price at which total revenue can be maximized for Maa mustard oil if the
competitors’ prices do not increase in october2015 (scenario 1)? If competitors increase their price by

around 6% as suggested in case (scenario 2), what would be the optimum price? Does the company
benefit if competitors increase their price?
perform all calculation under the assumption of no
increase in promotional expenditure in the next month and 1% increase in the
per capita
income
of
consumer?
Ans: Q (demand_Maa)
= 5024.753-136.6168(own_price)+ 117.4078(compe_price) -
0.2823(inc_per_capita)+ 7.8651(pro_exp)
……………………………………………………………(1)
A.T.Q
Prediction of October 2015 optimum price where total revenue can be maximized
compe_price = 109.14
inc_per_capita=7620.601 (1% increase)
-------à (7545.15 *1.01)
pro_exp
=1247.31
own_price
=P
Quantity demand =Q
Q = 5024.753-136.6168P+117.4078*(109.14)-0.2823*(7620.601 )+ 7.8651*(1247.31)
Q=5024.753-136.6168P + 12813.8872 - 2151.2956 + 9810.2178
Q = 25497.5624-136.6168P---------(2)
Now,
Total Revenue = TR
TR=
P * Q--------(3)
By putting eq 2 in (3) we get
TR= P(25497.5624-136.6168P)
TR=25497.5624P-136.6168P^2------------(4)
Now differentiating both sides w.r.t to Q
d(TR)/d(P) = 25497.5624 *d(P)/ d(P)-2*136.6168*P* d(P)/ d(P)
d(TR)/d(P) = 25497.5624- 273.2336P
As slope at TR max is zero therefore

d(TR)/d(P)=0
0= 25497.5624- 273.2336P
P = 25497.5624/273.2336
P= 93.3178---------(5)
Now putting value of P in eq(4)
TR=25497.5624*93.3178-136.6168*93.3178*93.3178
TR= 2379376.4285-1189688.0294
TR=1189688.3991
The optimum price at which total revenue can be maximized is 93.3178
Scenario 2
Prediction of October 2015 optimum price where total revenue can be maximized
compe_price = 115.6884(6% increase)------à
109.14*1.06
inc_per_capita=7620.601 (1% increase)
-------à (7545.15 *1.01)
pro_exp
=1247.31
own_price
=P
Quantity demand =Q
Q = 5024.753-136.6168P+117.4078*(115.6884)-0.2823*(7620.601 )+ 7.8651*(1247.31)
Q=5024.753-136.6168P + 13582.7205- 2151.2956 + 9810.2178

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- Spring '18
- Supply And Demand, quan ty, price of maa mustard oil, Maa Oil.- Positive, Hind Oil