7) The Pricing Decision Flashcards
1
Q
Price Elasticity of Demand (PED), how to calculate?
A
% change in demand / % change in price
2
Q
When given the demand function (P = a - bX) how do you calculate the Marginal Revenue (MR) function?
A
It is the demand function with b multiplied by 2 (P = a - 2bX)
3
Q
When using demand functions how to determine number of units to produce to maximise profit?
A
Profit is maximised where Marginal (Variable) Cost (MC) = Marginal Revenue (MR)
