Question

You have been hired as a marketing consultant to *Big Book
Publishing, Inc.*, and you have been approached to determine
the best selling price for the hit calculus text by Whiner and
Istanbul entitled *Fun with Derivatives*. You decide to make
life easy and assume that the demand equation for *Fun with
Derivatives* has the linear form *q* = *mp* +
*b*, where *p* is the price per book, *q* is
the demand in annual sales, and *m* and *b* are
certain constants you must determine.

(a) Your market studies reveal the following sales figures: when the price is set at $49.00 per book, the sales amount to 10,000 per year; when the price is set at $79.00 per book, the sales drop to 1000 per year. Use these data to calculate the demand equation.

q=

(b) Now estimate the unit price that maximizes annual
revenue.

$

Predict what Big Book Publishing, Inc.'s annual revenue will be at
that price.

$

Answer #1

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