Question

a gift shop sells 160 wind chimes per month at $150 each. the owners estimate that for each $15 increase in price, they will sell 5 fewer wind chimes per month. find the price per wind chime that will maximize revenue.

Answer 1

The price per wind chime that will maximize revenue = $ 315

Explanation:

Given - A gift shop sells 160 wind chimes per month at $150 each. the owners estimate that for each $15 increase in price, they will sell 5 fewer wind chimes per month.

To find - Find the price per wind chime that will maximize revenue.

Proof -

Given that,

Total Wind chimes selling = 160

Price of each Wind chime = $150

Now,

Given that, for each $15 increase in price, they will sell 5 fewer wind chimes per month.

So,

Let the price = 150 + 15x

So,

Number of wind Chimes sold per month = 160 - 5x

So,

Total Revenue, R = (150 + 15x)(160 - 5x)

= 24000 - 750x + 2400x - 75x²

= 24000 + 1650x - 75x²

⇒R(x) = 24000 + 1650x - 75x²

Differentiate R with respect to x , we get

R'(x) = 1650 - 150x

Now,

For Maximize Revenue, Put R'(x) = 0

⇒1650 - 150x = 0

⇒150x = 1650

⇒x = 1650/150

⇒x = 11

∴ we get

Price per Wind chime = $ 150 + 15(11)

= $ 150 + 165

= $ 315

So,

The price per wind chime that will maximize revenue = $ 315