Your company manufactures two models of speakers, the Ultra Mini and the Big Sta

Question

Your company manufactures two models of speakers, the Ultra Mini and the Big Stack. Demand for each depends partly on the price of the other. If one is expensive, then more people will buy the other. If p1 is the price of the Ultra Mini, and p2 is the price of the Big Stack, demand for the Ultra Mini is given by: q1(p1, p2) = 100,000 ? 800p1 + p2 where q1 represents the number of Ultra Minis that will be sold in a year. The demand for the Big Stack is given by: q2(p1, p2) = 150,000 + p1 ? 800p2 Find the prices for the Ultra Mini and the Big Stack that will maximize your total revenue. P1=____dollars P2=____dollars

Explanation / Answer

TR of Ultra Mini: (p1) ( 100,000 - 200p1 + p2 ) Partially differentiate with respect to p1 MR = 100000 - 400p1 + p2 .......Eq1 TR of Big Stack (p2) (150000 + p1 - 200p2 ) MR = 150000 + p1 - 400p2 .......Eq2 Set Eq1 and Eq2 to zero (for max) and solve simultaneously: 100000 - 400p1 + p2 = 0 150000 + p1 - 400p2 = 0 p1 = 250.94, p2 = 375.62

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