A firm demand function for its output is p=400-0.5q. To maximize sales revenue,what price should be charged
Given the general form of Demand Function: P = f(Q),
Then the general form of Inverse Demand Function is: O = f-1(P)
Demand Curve: "P = 400 - 0.5 Q"
Driving Inverse Demand Curve:
"0.5 Q = 400 - P\\\\\n\nQ =\\frac{ (400 - P ) }{ 0.5}\\\\\n\nQ = 400 \/ 0.5 - P \/ 0.5"
Inverse Demand Curve: Q = 800 - 2P
We can see that at Price $200, the total revenue is maximized at TR = $80,000
=> To maximize sales revenue, firm should charge price of $200
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