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A manufacturer produces and sells two products, A and B. The unit variable cost is sh.12 and sh.8 for A and B respectively. A review of...

      

A manufacturer produces and sells two products, A and B. The unit variable cost is sh.12
and sh.8 for A and B respectively. A review of selling prices is in progress and it has
been estimated that, for each product and increase in the selling price would result in a
fall in demand of Sh.500 units per every Sh.1 increase in price and similarly a decrease of
Sh.1 in price would result in an increase in demand of 500 units.
fig535250.png
Required:
Calculate the profit-maximizing price for reach product.

  

Answers


Kavungya
The demand function can be determine as follows:
P = A – bV
Where P is the price per unit
V is the volume of sales at that price
A is the price at which V = O (Maximum price)
b is the rate at which the price falls for volume increases a proportion of sales volume.
fig535251.png
fig635251.png
Kavungya answered the question on May 3, 2021 at 11:52


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