1. Angelo Dalisay Raymond Ye Yang Zheng
Total Cost Analysis
Angelo Dalisay
Raymond Ye
Yang Zheng

2. Evaluating Pricing Policy
Costs
% change
output
change in
in output q TC
-20
2000
-5250
34750
-10
2250
-2500
37500
2500
40000 10
2750
2450
42450 20
3000
4700
44700
Revenues
% change
change in
in price p
sales q
-20 16
1500
4000
-10 18
500
3000 20
2500 10 22
-400
2100 24
-800
1700
costs:
TC = 9.94q
demand:
p= q
profit=pq-TC
profit = (-.0035q^ q)-9.94q-15030
profit = q^ q
max profit : 0 = -.007q+19.28
q = 2754
Reinserting q= 2754 gives TC =
Using demand function, we set p = $19.58

3. Demand Rises by 10% Should demand rise by 10%: Rewrite demand function
costs:
TC = 9.94q
demand:
p= q
profit=pq-TC
profit = (-.0035q^ q)-9.94q-15030
profit = q^ q
max profit : 0 = -.007q
q = 3171
We revise our profit maximizing production to q = 3171
This changes TC to
Using demand function, p =

4. Sensitivity Analysis
Assuming actual demand was 10% less than reported: Revised demand function
costs:
TC = 9.94q
demand:
p= q
profit=pq-TC
profit = (-.0035q^2+26.3q)-9.94q-15030
profit = q^ q
max profit : 0 = -.007q+16.3
q = 2337
Comparing to our first case, we see that quantity produced was
too high and is now revised down to Reinserting q = 2337 into
the demand function we get p = We would have set price too
high had we used the optimistic predictions.