Why It Matters
Use the concept of instantaneous rate of change of a function from graphical and algebraic points of view to optimize functions used in accounting, business, and economics, especially revenue and profit.
Introduction
You are in a boardroom and someone shows the following on a powerpoint:
Demand function for Product X: q = 400 - 2p
Current Price: p = $100
Should we raise or lower the price to increase our profits?
This is a great question, because all businesses want to optimize their profits. The issue is what will happen if we raise or lower the price? If it goes up will people stop buying it? If it goes down will more people be inclined to buy it? How can math help us determine this?Learning Outcomes
- Reading: Applied Optimization, part I
- Interactive: Maximizing Volume
- Video: Max and Min
- Video: Max Revenue
- Video: Max Profit
- Reading: Applied Optimization, part II
- Reading: Marginal Cost
- Video: Total and Marginal Cost (no derivative)
- Video: Marginal Cost, Revenue, and Profit (derivatives)
- Reading: Elasticity
- Video: Elasticity of Demand
