\"Xerox Corporation develops, manufactures, and services document equipment and

Question

"Xerox Corporation develops, manufactures, and services document equipment and software solutions worldwide. Assume the company offered $75 off the $1,475 regular price on the phaser 6360, a durable high speed color copier, and internet sales jumped from 700 units to 800 units per week.” Using the statement above, estimate the (linear) demand curve for the color copier.

Recapping from the question above, if marginal cost per unit is $650, calculate the profit maximizing price-output combination. [Remember: the marginal revenue curve has the same intercept as the demand curve but has twice its negative slope (falls twice as fast)]

Explanation / Answer

The linear demand curve will be P = x + yQ 1475 = x+y(700)

Here y is the slope which is cange in y/change in x = -75/100=-0.75

1475=x-0.75*700 so x=2000

so linear demand curve P = 2000-0.75Q

Now R = P*Q

R = 2000Q*0.75Q^2

MR= dR/dQ= 2000-1.5Q

Now MR=MC

so 2000-1.5Q=650 so Q=900

and P = 2000-0.75*900 = $1325

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