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A manufacturer sells 40 boats per month at 22000 dollars per boat, and each month demand is increasing at a rate of 6 boats per month. What is the fastest the price col drop before the monthly revenue starts to drop?

Ask by Chen Davison. in the United States
Jan 24,2025

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The price can decrease by up to $3,300 per month before revenue starts to drop.

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To maintain or increase monthly revenue, a decrease in price must be offset by an increase in sales. Currently, revenue is calculated as \(R = P \times Q = 22000 \times 40 = 880000\) dollars. If the price drops, let's say by \(x\) dollars, the new price becomes \(22000 - x\). With demand increasing by 6 boats per month, the new quantity sold would be \(40 + 6t\) (where \(t\) is the months passed). The condition to keep revenue stable or rising will be where: \((22000 - x)(40 + 6t) > R\). To find the maximum \(x\) before revenue starts to drop, you solve for when demand increase equals the price drop effect. Simplifying this leads us to discover a balance point where you can safely lower the price while ensuring demand covers the deficit in revenue. Enjoying the thrill of profit optimization is like navigating the waters of a serene lake—keep your eyes sharp for the waves before they start!

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