Practical A1: A 'Rubber Eraser' manufacturing company currently charge Rs.

10/- for an eraser and it sells 1000 units.

Assume that the variable cost to produce an eraser is Rs 2/-. Finally, suppose that the price elasticity of demand for eraser 1200
is 2, and the demand curve is linear. Your objective is to maximize profit be changing price.

1000

Price Demand Elasticity Cost 800

10 1000 2 2
10.1 980
600

Equation y=-200x+300 400

Current Pro8000
200
New Price 8.5
New Dema1300
0
New Profit 8450 0 2 4 6
0

0
0 2 4 6 8 10 12
A power supply company wants to determine how to maximize the profit earned from a customer whose demand in kilowatt hours (kwh) for power is given by
q=20-2p. It costs Rs. 2 to produce a unit of power. Assume that currently it use linear pricing that is charging same price for each unit sold. You are required to
find out how the company can maximize profit by using 'Non Linear - Non Standard Quantity Discount' pricing.

Price Demand Cost Current Profit

6 8.000000015 2 32

Cut off 15 Maximum consumer surplus0.000003397079226

HP 75.64612 Unit Purchased 16
LP 6 Revenue 95.9999966
Total Cost 32
Profit 63.9999966

p=20-2p, so p=10-q/2
mid point q units Q value p cumulative value price paid consumer surplus
0.5 1 9.75 9.75 75.64611546 -65.89611546
1.5 2 9.25 19 151.2922309 -132.2922309
2.5 3 8.75 27.75 226.9383464 -199.1883464
3.5 4 8.25 36 302.5844618 -266.5844618
4.5 5 7.75 43.75 378.2305773 -334.4805773
5.5 6 7.25 51 453.8766928 -402.8766928
6.5 7 6.75 57.75 529.5228082 -471.7728082
7.5 8 6.25 64 605.1689237 -541.1689237
8.5 9 5.75 69.75 680.8150392 -611.0650392
9.5 10 5.25 75 756.4611546 -681.4611546
10.5 11 4.75 79.75 832.1072701 -752.3572701
11.5 12 4.25 84 907.7533855 -823.7533855
12.5 13 3.75 87.75 983.399501 -895.649501
13.5 14 3.25 91 1059.045616 -968.0456165
14.5 15 2.75 93.75 1134.691732 -1040.941732
15.5 16 2.25 96 95.9999966 0.000003397079226
16.5 17 1.75 97.75 101.9999964 -4.249996391
17.5 18 1.25 99 107.9999962 -8.999996178
18.5 19 0.75 99.75 113.999996 -14.24999597
19.5 20 0.25 100 119.9999958 -19.99999575
 for power is given by
d. You are required to