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Maximizing Revenue Function Explained

The document discusses revenue functions for companies and how the revenue R(x) is calculated based on the number of units x sold and the price per unit p(x). It provides an example of a fast food restaurant calculating its maximum revenue from hamburger sales based on monthly demand. By setting up the revenue function R(x) = x[(60,000-x)/20,000] and finding where it is maximized, the restaurant should sell 30,000 hamburgers per month for maximum revenue of $45,000. The restaurant would make no revenue if it sold either 0 or 60,000 hamburgers.

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229 views1 page

Maximizing Revenue Function Explained

The document discusses revenue functions for companies and how the revenue R(x) is calculated based on the number of units x sold and the price per unit p(x). It provides an example of a fast food restaurant calculating its maximum revenue from hamburger sales based on monthly demand. By setting up the revenue function R(x) = x[(60,000-x)/20,000] and finding where it is maximized, the restaurant should sell 30,000 hamburgers per month for maximum revenue of $45,000. The restaurant would make no revenue if it sold either 0 or 60,000 hamburgers.

Uploaded by

bmsanilkumar
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd

Revenue function Suppose x denotes the number of units a company plan to produce or sell, usaually, a revenue function R(x)

is set up as follows: R(x)=( price per unit) (number of units produced or sold). Sometimes the price per unit is a function x, say, p(x). It is often called a demand function too because when a company produce (or sell) more, it means there is more demand for the prouct, and the price per unit should come down. Let's see the following Example: A fast-food restaurant has determind that the monthly demand for their hamburgers is given by p(x) = (60,000-x)/20,000 . (a) Find the number of hamburgers this restaurant should sell in order that the revenue is maximized. (b) Find the maximum revenue. (c) When will the restaurant make no revenue at all? We first set up the revenue function R(x) = x[(60,000-x)/20,000] = -x 2 /20,000 + 3x Notice that y=R(x) is a parabola opening downward, it has a maximum at x = 30,000 In other words, when the restaurant sells 30,000 hamburgers. The maximum revenue is R(30,000)=$45,000. And the restaurant makes no revenue when R(x)=0, which means -x 2/20,000 + 3x =0. Using factoring technique, we get x=0 or x =60,000 . This means that the restaurant makes no revenue when they do not sell any hamburger or when they sell 60,000 hamburgers.

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