Bob sells tires. He knows that his weekly sales drop if he increases the unit price p (in dollars). The weekly sales are given by an unknown function N(p). His weekly revenue is R(p)=pN(p). Bob is currently selling tires for 100 dollars each. His weekly sales are running at 120 tires per week, so N(100)=120. His marketing department estimates that he will lose 2 sales per week for each 10 dollar increase in unit price, so N′(100)=−0.2. Estimate Bob's increase in weekly revenue for each one dollar increase in tire price.

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Answer:

Increase in weakly revenue = $9.8

Explanation:

Price (P) = 100, Demand or Sales N (P) = 120.

So revenue R(P) = P x N(P) = 120 x 100 = 120000

Given : 2 sales per week lost for 10 units increase in price.

New price  (P') = 110 , New Demand or sales N' (P) = 118

So new revenue R' (P) = P' x N' P = 110 x 118 = 12980

Change in Total revenue due to 10 units price rise = 12980 - 120000 = 980

So, change in total revenue due to one unit price rise = 980/ 10 = 9.8

Increase in weakly revenue = $9.8

Revenue refers to money and it is generated from normal business operations, Also it is calculated as the average sales price times the number of units sold.

Revenue

Price (P) = 100, Demand or Sales[tex]N (P) = 120.[/tex]

So The revenue is [tex]R(P) = P x N(P) = 120 x 100 = 120000[/tex]

Then Given information are: 2 sales per week lost for 10 units increase in price.

Now the New price is[tex](P') = 110[/tex] , New Demand or sales[tex]N' (P) = 118[/tex]

So new revenue[tex]R' (P) = P' x N' P = 110 x 118 = 12980[/tex]

Change in Total revenue due to 10 units price rise =[tex]12980 - 120000 = 980[/tex]

Thus, It is changed in total revenue due to one unit price rise = [tex]980/ 10 = 9.8[/tex]

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