Answer to Question #187980 in Economics of Enterprise for THILAKAVATHY THILA

Question

If demand function is given as the following: 

Qz = 230 -2.75 Pz + 0.5 I + 1.2 Pm + 0.6A 

Where Qz is quantity of Good z sold, Pz is price of Good z per unit, I is per capita income, Pm is price of competitor and A is the amount of advertising spent. 

Current values:  Pz= RM 55 I= RM 9000    Pm= RM 50    A =RM 12,000

Please Determine the total revenue maximizing price and quantity

Answer 1

$SOLUTION$

given demand function:

$Q_Z=230-2.75P_Z+0.5I+1.2P_M+0.6A$

And

$Current\ values: Pz= RM 55\ I= RM 9000 \ Pm= RM 50 \ A =RM 12,000$

$Q_Z=230-(2.75\times55)+(0.5\times9000)+(1.25\times 50)+(0.6\times12000)$

$Q_Z=230-151.25+4500+60+7200$

$Q_Z=11,838.75$

$TR=P\times Q$

TR=$(11838.75 )p$

MR=P

P=$\frac{TR}{Q}$

P=$\frac{11838.75}{Q}$