Let's say I have no idea how to set this problem up. Instead of going straight to an equation, I'll need to put in some real numbers, see what I do when I know what the values are, and then follow the pattern to get my formula. Here is my reasoning, neatly laid out in a table:
Then my formula for my revenues R after x fifty-cent price hikes is:
R(x) = (12 + 0.5x)(36 – 2x) = 432 – 6x – x2 = –x2 – 6x + 432
The maximum income will occur at the vertex of this quadratic's parabola, and the vertex is at
(–3, 441):
h = –b/2a = –(–6)/2(–1) = 6/(–2) = –3
k = R(h) = –(–3)2 – 6(–3) + 432 = –9 + 18 + 432 = 450 – 9 = 441
That is, my income will be maximized (assuming the journal article is correct) if I lower my current price of $12 by three times of fifty cents, or by $1.50.
I should charge $10.50 per canoe.
Whenever you're not sure of your formula, try doing what I did above: write out what you would do if you knew what the numbers were, and see if you can turn that into a formula. But make sure you write things out completely, like I did, so you can see the pattern. Warning: Don't simplify too much in your head, or you could miss what your formula is supposed to be.
price hikes price per rental number
of rentals total income / revenue
none $12.00 36 $12.00×36 = $432.00
1 price hike $12.00 + 1(0.50) 36 – 1(2) $12.50×34 = $425.00
2 price hikes $12.00 + 2(0.50) 36 – 2(2) $13.00×32 = $416.00
3 price hikes $12.00 + 3(0.50) 36 – 3(2) $13.50×30 = $405.00
x price hikes $12.00 + x(0.50) 36 – x(2) (12 + 0.5x)(36 – 2x)
Let's say I have no idea how to set this problem up. Instead of going straight to an equation, I'll need to put in some real numbers, see what I do when I know what the values are, and then follow the pattern to get my formula. Here is my reasoning, neatly laid out in a table:
Then my formula for my revenues R after x fifty-cent price hikes is:
R(x) = (12 + 0.5x)(36 – 2x) = 432 – 6x – x2 = –x2 – 6x + 432
The maximum income will occur at the vertex of this quadratic's parabola, and the vertex is at
(–3, 441):
h = –b/2a = –(–6)/2(–1) = 6/(–2) = –3
k = R(h) = –(–3)2 – 6(–3) + 432 = –9 + 18 + 432 = 450 – 9 = 441
That is, my income will be maximized (assuming the journal article is correct) if I lower my current price of $12 by three times of fifty cents, or by $1.50.
I should charge $10.50 per canoe.
Whenever you're not sure of your formula, try doing what I did above: write out what you would do if you knew what the numbers were, and see if you can turn that into a formula. But make sure you write things out completely, like I did, so you can see the pattern. Warning: Don't simplify too much in your head, or you could miss what your formula is supposed to be.
price hikes price per rental number
of rentals total income / revenue
none $12.00 36 $12.00×36 = $432.00
1 price hike $12.00 + 1(0.50) 36 – 1(2) $12.50×34 = $425.00
2 price hikes $12.00 + 2(0.50) 36 – 2(2) $13.00×32 = $416.00
3 price hikes $12.00 + 3(0.50) 36 – 3(2) $13.50×30 = $405.00
x price hikes $12.00 + x(0.50) 36 – x(2) (12 + 0.5x)(36 – 2x)
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