Reading time: ~15 min

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Introduction

Welcome to SkateSum, a small company that produces

skateboards. Engineers have been working on a
brand new model, the SquareBoard, which is finally
ready to start production. You’ve been put in charge
of finding the optimal resale price for the skateboards – and it turns
out that building them is not cheap:

The tools and machines required to construct

skateboards cost $5,000. This is often called a fixed
cost.

Every skateboard costs additional $30 worth of of wood,

other materials, and salary for the employees. This is often
called a variable cost.

In other words, the cost of producing n skateboards is

cost = ??? .

The new skateboards are highly anticipated, but if the price is too high, fewer people will
actually buy one. We can show this on a chart with the price of a skateboard along the x-axis,
and the corresponding number of people who want buy one (the demand) on the y-axis.

Which of these charts makes most sense for the relationship between price and demand?
 demand demand demand

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price price price

A higher price means that fewer people want to buy a skateboards, so the graph of the
function has to move downwards. After doing some market research, economists came up
with the following equation:

demand = 2800 – 15 × price

For example, if a skateboard costs $80, the demand will be ??? units.

The revenue of our company is the total income we make. It is the number of skateboards
sold (the demand) times the price of each:

revenue = demand × price

But the number we are more interested in is our profit: the revenue we make from selling
skateboards, minus the cost of producing them. Can you find an equation that expresses our
profit in terms of just the price of every skateboard?

profit = revenue − cost

= ???

Notice that this equation contains price as well as price 2 . It is called a

Quadratic Equation, named after the Latin word “quadratus” for square.

To work out how to maximise our profit, let’s calculate the profit for a few different prices:

price/$ 20 40 60 80 100 120 140 160 18

profit/$ –30k 17k ??? k ??? k ??? k ??? k 72k 47k 10

Now we can plot all these points in a coordinate system, and connect them with a line:
 profit/$

80k
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60k Reveal all steps

40k

20k
price/$
0
20 40 60 80 100 120 140 160 180
–20k

–40k

–60k

–80k

You’ll remember that the graph of a linear function is always a straight line. But as you saw
above, the graph of a quadratic function is curved. It even has a specific name: a Parabola.

If the price is 0 , our profit is negative, because we’re just giving away expensive skateboards
for free. As the price increases, our profits rise, too. However, if the skateboards become
too expensive , people no longer want to buy them and our profit falls again.

We can maximise our profit by pricing the skateboards at approximately $ ??? .

In the real world, it can be very difficult for companies to determine a precise equation for
their profit – and it is likely to be much more complicated than this example.
Reading time: ~15 min
Still, quadratic equations appear Reveal all steps
everywhere in nature, engineering and economics. In this
course you will learn different methods for solving quadratic equations and to understand
their graphs.