Question

A marketing firm wishes to maximize the total amount of revenue it receives from two markets. In the first market demand is p1(q1)  200 – q1 and in the second market demand is p2(q2)  200 – q2. The firm faces a constraint that the quantities allocated must sum in total as follows q1 + q2 = 200. Using the Lagrangean method, derive the optimal allocation of quantities (q1*,q2*) across the two markets. (15 marks)

Answer 1

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