Answer to Question #81449 in Microeconomics for Sowmya

Question

A wholesaler of pencil charges 24/- per dozen on an order of fifty dozen or less. For order in excess of fifty dozen, the price is reduced by 20 paise per dozen. Find the size of the order in order to maximize revenue

Answer 1

When x>50, P = 24 – 0,2*(x-50) = 34 – 0,2x
Thus, TR = P*X = (34-0,2*X) = 34*x – 0,2*x^2
For maximum TR, we have d(TR)/dx = 34- 0,4*x = 0, or x=34/0,4 = 85 dozens.