Currently, the demand equation for baseball bats is Q = 100 - 2P. The current price is $15 per bat. Is this the best price to charge in order to maximize revenues?
What will be an ideal response?
The best price to charge is when you can sell the product to half of the market. If the price is $0, then you can sell 100 units potentially. But if you set the price at P = $25, you can sell exactly 50 units, or to half of the potential market. Thus, $25 is the best price. At a price of $25, you will receive a revenue of $25 x 50 units = $1,250, which will be the maximum revenue. At $15, you only make $15 x 70 = $1,050.
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