Question

A company knows that if it sets the price of a product at p dollars, the number of units sold will be x million, where p = 2 - x. If the cost of the product is given by 0.25 + 0.5x million dollars. What price should be set to make a profit of $ 0.25 million?

Answer 1

Two Answers: p = 1.5 or p = 1

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Step-by-step explanation:

x = number of products, in millions, sold

p = price per product

R = revenue

R = (number of products sold)*(price per product)

R = x*p

R = x(2-x)

R = 2x-x^2

C = costs

C = 0.25 + 0.5x

F = profit

F = revenue - costs

F = R - C

F = (2x - x^2) - (0.25 + 0.5x)

F = -x^2 + 1.5x - 0.25

We want a profit of 0.25 million, so plug in F = 0.25 and solve for x

F = -x^2 + 1.5x - 0.25

0.25 = -x^2 + 1.5x - 0.25

0 = -x^2 + 1.5x - 0.25 - 0.25

-x^2 + 1.5x - 0.5 = 0

Use the quadratic formula to find the two solutions to be x = 0.5 and x = 1

If x = 0.5, then p = 2-x = 2-0.5 = 1.5

If x = 1, then p = 2-1 = 1

There are two price points (p = 1.5 and p = 1) that lead to the same profit F = 0.25