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Chapter 23 PDF
Chapter 23 PDF
CHAPTER 23
I. Questions
The data given in table form are plotted on a cc-place, and a freehand
straight line is fitted to the points, as shown on page 17-2. From the
chart we may read points (5.50, 4500) and (10, 0). Let p represent the
price and q units of the mechanical toy. Substituting in formula (2) of
Arithmetic (Linear) trend method, we have
q - 4500 = 0 - 4500
p - 5.50 10 - 5.50
4.50(q - 4500) = -4500(p- 5.50),
and
q = Q(p) = -1000p + 10,000.
Note that Q is the unit demand function where price is the independent
and quantity the dependent variable.
23-1
Chapter 23 PFS: Project Background and Economic Aspect
Q (p)
10,000
9,000
8,000
7,000
6,000
(5.50, 4,500)
5,000
4,000
3,000
Q(p) = -1,000p + 10,000
2,000
1,000 (10, 0)
0 1 2 3 4 5 6 7 8 9 10 p
(PRICE - PESOS)
Step 2: Find the total cost function.
Let C be such a function. Since fixed costs are expected to be P5000 and
variable P2.00 per toy, the cost function by formula (1) of Arithmetic
(Linear) trend method is
C(q) = 2q + 5000.
On the basis of functions Q and C we can derive the sales revenue and
profit functions.
23-2