Question

Please Help!
The manager of a home electronics store is considering re-pricing a new model of digital camera. At the current price of $680, the store sells about 70 cameras each month. Sales data from other stores indicate that for each $20 decrease in price, about 5 more cameras would be sold. The table shows some x and y values; where x is the number of price decreases and y is the revenue.

a) How many price decreases should the manager apply?
b) What price produces the maximum revenue?
c) What is the maximum revenue?

Answer 1

The reduction in price that will be applied is $200.

How to calculate price?

From the given information, the price function will be:

P - 680/(680 - 660) = (Q - 70)/(70 - 75)

P = -4Q + 960

Revenue will be:

= Price × Quantity

= (-4Q + 960)Q

= 4Q² + 960Q

Differentiating this will be Q = 120

Price will be:

= (-4 × 120) + 960

= 480

The reduced price will be:

= 680 - 480

= 200

The maximum revenue will be:

= 480 × 120

= 57600

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