our price effect outweighs the quantity effect hence causing an increase in the

Our price effect outweighs the quantity effect hence

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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
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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
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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

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