Question

Assume that you manage a firm that sells calculators. You want to sell calculators to both commercial users and home users, and so you have developed 2 types of calculators - fancy and basic calculators. Each customer type has the following valuations for each type of calculator:

Home User Commercial User

Fancy Calculator $100 $200

Basic Calculator $30 $50

If you have an 100 home users and 100 commercial users that at most will buy 1 calculator each, you will maximize total revenue by setting what price for the fancy calculator? (Write answer without the dollar sign.)

Answer 1

Solution:-

	Home User	Commercial User
Fancy Calculator	100	200
Basic Calculator	30	50

Therefore,

P(f) = Price of Fancy Calculator

When 0≤P≤ 100,   200 calculators are sold (both home and commercial users will buy)     

When100 < P(f) ≤ 200, 100Calculators are sold (Only commercial users will buy)

When P(f) >200, 0 Calculators are sold.

So, if you want to sell 100 calculators (Fancy), the price should be 200.

Revenue = 200 * 100 = 20,000

If you want to sell 200 Fancy Calculators,

Price should be 100

Revenue = 100 * 200 = 20,000

So, the maximum revenue is earned when the price of Fancy calculators is either 100 or 200.

Hence, the answer is 100 or 200.