Revenue and the Demand Function

Oct 13, 2025 by wbrum.org 16 views

Understanding the Demand Function

The demand function, denoted as D(x), represents the relationship between the price of a product and the quantity demanded. In this case, the demand function is given by the equation p = D(x) = 183.6 - 3.4x, where p is the price and x is the quantity demanded. This equation indicates that as the quantity demanded increases, the price decreases.

Revenue and the Demand Function

Revenue is the total amount of money earned from the sale of a product. It is calculated by multiplying the price of the product by the quantity sold. In this case, the revenue function can be represented as R(x) = px. Substituting the demand function into the revenue function, we get R(x) = (183.6 - 3.4x)x.

Expanding the Revenue Function

To find the maximum revenue, we need to expand the revenue function. Expanding the function R(x) = (183.6 - 3.4x)x, we get R(x) = 183.6x - 3.4x^2.

Finding the Maximum Revenue

To find the maximum revenue, we need to find the critical points of the revenue function. Critical points occur when the derivative of the function is equal to zero or undefined. Taking the derivative of the revenue function with respect to x, we get R'(x) = 183.6 - 6.8x.

Setting the Derivative Equal to Zero

To find the critical points, we set the derivative equal to zero and solve for x. Setting R'(x) = 0, we get 183.6 - 6.8x = 0.

Solving for x

Solving the equation 183.6 - 6.8x = 0 for x, we get x = 183.6 / 6.8 = 27.

Verifying the Second Derivative

To verify that the critical point is a maximum, we need to check the second derivative. Taking the second derivative of the revenue function, we get R''(x) = -6.8. Since the second derivative is negative, we can conclude that the critical point is a maximum.

Conclusion

In conclusion, the value of x that maximizes the revenue is 27. This means that the quantity demanded that maximizes the revenue is 27 units.

Maximizing Revenue with a Demand Function: Step-by-Step Solution

Step 1: Understand the Demand Function

The demand function is given by the equation p = D(x) = 183.6 - 3.4x, where p is the price and x is the quantity demanded.

Step 2: Find the Revenue Function

The revenue function is given by R(x) = px. Substituting the demand function into the revenue function, we get R(x) = (183.6 - 3.4x)x.

Step 3: Expand the Revenue Function

Expanding the revenue function, we get R(x) = 183.6x - 3.4x^2.

Step 4: Find the Critical Points

To find the critical points, we set the derivative of the revenue function equal to zero and solve for x. Setting R'(x) = 0, we get 183.6 - 6.8x = 0.

Step 5: Solve for x

Solving the equation 183.6 - 6.8x = 0 for x, we get x = 183.6 / 6.8 = 27.

Step 6: Verify the Second Derivative

Taking the second derivative of the revenue function, we get R''(x) = -6.8. Since the second derivative is negative, we can conclude that the critical point is a maximum.

Step 7: Conclusion

Q: What is the demand function, and how is it used in this problem?

A: The demand function is a mathematical equation that represents the relationship between the price of a product and the quantity demanded. In this problem, the demand function is given by the equation p = D(x) = 183.6 - 3.4x, where p is the price and x is the quantity demanded. This equation is used to find the revenue function, which is then maximized to find the quantity demanded that maximizes revenue.

Q: What is the revenue function, and how is it related to the demand function?

A: The revenue function is a mathematical equation that represents the total amount of money earned from the sale of a product. It is calculated by multiplying the price of the product by the quantity sold. In this problem, the revenue function is given by R(x) = px. Substituting the demand function into the revenue function, we get R(x) = (183.6 - 3.4x)x.

Q: How do you find the maximum revenue?

A: To find the maximum revenue, we need to find the critical points of the revenue function. Critical points occur when the derivative of the function is equal to zero or undefined. We take the derivative of the revenue function with respect to x, set it equal to zero, and solve for x. This gives us the quantity demanded that maximizes revenue.

Q: What is the second derivative, and why is it important?

A: The second derivative is the derivative of the derivative of a function. In this problem, the second derivative is used to verify that the critical point is a maximum. If the second derivative is negative, it means that the critical point is a maximum.

Q: What is the significance of the quantity demanded that maximizes revenue?

A: The quantity demanded that maximizes revenue is the quantity that results in the highest total revenue. This is important because it helps businesses and organizations to make informed decisions about production and pricing.

Q: Can you provide an example of how to use the demand function and revenue function in a real-world scenario?

A: Suppose a company produces and sells a product with a demand function given by p = D(x) = 183.6 - 3.4x. The company wants to maximize revenue. Using the revenue function R(x) = (183.6 - 3.4x)x, we can find the quantity demanded that maximizes revenue by following the steps outlined in the problem. This will give us the quantity that results in the highest total revenue.

Q: What are some common applications of the demand function and revenue function?

A: The demand function and revenue function have many applications in economics and business. Some common applications include:

Pricing and production decisions
Market analysis and forecasting
Supply and demand analysis
Revenue maximization and profit maximization

Q: Can you provide some tips for working with the demand function and revenue function?

A: Here are some tips for working with the demand function and revenue function:

Make sure to understand the relationship between the demand function and revenue function.
Use the derivative and second derivative to find critical points and verify that they are maxima or minima.
Use the revenue function to find the quantity demanded that maximizes revenue.
Consider using numerical methods or graphing tools to visualize the revenue function and find the maximum revenue.

Q: What are some common mistakes to avoid when working with the demand function and revenue function?

A: Here are some common mistakes to avoid when working with the demand function and revenue function:

Failing to understand the relationship between the demand function and revenue function.
Not using the derivative and second derivative to find critical points and verify that they are maxima or minima.
Not using the revenue function to find the quantity demanded that maximizes revenue.
Not considering the limitations and assumptions of the demand function and revenue function.