Market Equilibrium
Suppose your firm faces a demand curve as follows: Q dx = 100 – 0.3PX + 0.6PY + 0.03M where M is per capita income currently estimated at $22,000. PY is $400. At what price would your firm maximize its total revenues and what would that revenue be at that point? (Hint: Simplify the demand function by inserting the given values of PY and M. Then think about where TR is maximized. Remember that for this particular linear demand function, αx = -0.3. Find price and TR.
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