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Managerial Economics: Class 3: 04 April, 2017

Mohiuddin Ahmed Sarker, Roll: ZR-1603015

Situation Analysis: If a norwester hit on mango orchard what will be the market scenario-
Supply curve after few days and remaining
season
Normal supply curve
P
10 Supply curve immediate after norwester
08
6
0
0

6 7 8 Q

Demand = (Price, quality, disposable income, availability of alternatives, .)


Qd = 100000 100P , when other things remaining constant

100
00 D

Q 100000

Exercise:

Q = 8.5 0.05P ---------Eq. 1 (demand equation), where Q = quantity and P= price


C = 100 + 38Q ----------Eq. 2 (cost equation), where Q = quantity and C= Cost
= TR TC ------------Eq. 3 (Profit equation), where = profit/loss, TR= Total revenue and TC = Total
cost

From eq. 1, P = 170 20Q ---------Eq. 4

Now, TR = P.Q
=> TR = (170 20Q)Q
=> TR = 170Q - 20Q2 ------- Eq. 5

From eq. 3,
= TR TC
=> = (170Q - 20Q2) (100 + 38Q)
=> = - 20Q2 +132Q 100 ---------Eq. 6

/Q = - 40Q + 132
At max, => - 40Q + 132 = 0, (For max, /Q = 0)
=> Q = 3.3
Managerial Economics: Class 3: 04 April, 2017
Mohiuddin Ahmed Sarker, Roll: ZR-1603015

Calculation of TR, TC, , Marginal Revenue (MR), Marginal Cost (MC) and Marginal Profit (M )
assuming quantity 0, 1, 2, 3, 4, 5, 6 & 7

Q TR TC MR MC M
0 0 100 -100
1 150 138 12 150 38 112
2 260 176 84 110 38 72
3 330 214 116 70 38 32
4 360 252 108 30 38 -8
5 350 290 60 -10 38 -48
6 300 328 -28 -50 38 -88
7 210 366 -156 -90 38 -128

MC = TC/Q = - 40Q + 132, from eq. 2


MR = TR/Q = 170 - 40Q, from eq. 5
M = /Q = - 40Q + 132, from eq. 6
At max, => - 40Q + 132 = 0, (For max, /Q = 0); => Q = 3.3
So, From Eq. 4, at max, P = 170 20 X 3.3 = 104
Multifactors equation: = 20 + 2P - 2P2 + 4A A2 + 2PA
Use partial derivatives for Price and Partial derivatives for advert