So, in this scenario the firstly when take the case 1 then the Total Revenue decrease as
compared to case 2 Total Revenue value. Case 2 is example of Total Maximum Revenue after
that point of Price increase then its total revenue Decreases.

Question4:
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?
Answer4): -
Need to the find optimum Price at which Total revenue (TR) is maximized.
Qmaa= 5024.58-136.62 Op + 117.40 Cp - 0.2823 IPCp + 7.87 PEp.
Scenario 1): -
If
the competitors’ prices do not increase in october2015
(Keep Cp as constant)
Qmaa= 5024.58-136.62 Op + 117.40 Cp - 0.2823 IPCp + 7.87 PEp.
-----------(i)
Cp = 109.14
Op = P
IPCp = 7545.15 (As per Question it increases by 1%)
So, IPCpn = 7620.6015
PEp = 1247.31
Qmaa = Quantity demand
Putting all values of variables in Equation (i)
Qmaa = 5024.58
–
136.62P + 117.40*109.14
–
0.2823*7620.6015 + 7.87 * 1247.31
Qmaa = 5024.58 - 136.62P + 12813.036 - 2151.29580345 + 9816.3297
Qmaa = 25502.64
–
136.62P
-------------------------(ii)
For Total Revenue (TR)
TR = Qmaa * P
Putting the value Qmaa in the above equation
TR = 25502.64P
–
136.62P
2
---------------------------------(iii)
Taking differentiation from the sides w.r.s.t P
d(TR)/d(P) = 25502.64
–
273.24 P
As we know that Total Revenue is maximum when slope of d(TR)/d(P) equals to zero
So, d(TR)/d(P) =0

0 = 25502.64
–
273.24 P
P = 93.334
Putting the value of P in Eq (iii) we get the Total Revenue
TR = 25502.64*93.334
–
136.62*93.334
*
93.334
TR = 2,380,263.40176 - 1,190,129.00166072
TR = 1190134.401
So, the total Revenue TR is 1190134.401 is maximum when optimum Price P
is 93.334
Scenario 2)
If the
competitors’
prices increase in october2015 by 6 %
Qmaa= 5024.58-136.62 Op + 117.40 Cp - 0.2823 IPCp + 7.87 PEp.
---------(i)
Cp = 109.14 * 6 %
Cp = 115.6884
Op = P
IPCp = 7545.15 (As per Question it increases by 1%)
So, IPCpn = 7620.6015
PEp = 1247.31
Qmaa = Quantity demand
Putting all values of variables in Equation (i)
Qmaa = 5024.58
–
136.62P + 117.40*115.6884
–
0.2823*7620.6015 + 7.87 * 1247.31
Qmaa = 26269.08405655
–
136.62P -------------------------- (ii)
For Total Revenue (TR)
TR = Qmaa * P
Putting the value Qmaa in the above equation
TR = 26269.08405655P
–
136.62P
2
-----------------------------(iii)
Taking differentiation from the sides w.r.s.t P
d(TR)/d(P) = 26269.084
–
273.24P
As we know that Total Revenue is maximum when slope of d(TR)/d(P) equals to zero

So, d(TR)/d(P) =0
26269.084
–
273.24P = 0
P = 96.139

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- Summer '17
- Supply And Demand, Qmaa