Demand equation with many variables and finding Profit maximization
Post Voting Period
The voting period for this debate has ended.
after 0 votes the winner is...
It's a Tie!
Voting Style:  Open  Point System:  7 Point  
Started:  2/27/2016  Category:  Economics  
Updated:  2 years ago  Status:  Post Voting Period  
Viewed:  505 times  Debate No:  87341 
Debate Rounds (5)
Comments (0)
Votes (0)
This is not really an argument but a way of finding out how to maximize profits. Here is my problem. I have run a regression for a hypothetical business to find out its demand equation. I ran a linear relationship for the last 10 years. Quantity is a function of price, consumer disposable income, and population.
Q = a + bP+ cI + d Pop where a is the intercept and b,c and d are the coefficients Q is the quantity demanded P is the price, I is the disposable income and Pop is the population After running the regression here is my demand equation Q = 125 + 7.31P + .0030I + .0003Pop Now I know that price does not shift the demand curve but Income and population shift it to the right. I also know that for profit maximization MR = MC. In this case MC = 2. How do I find the MR of the demand equation above. It would be a very simple calculation using calculus if Price was the only variable but that is not realistic or the case here. Does any one out there have any suggestions??
This is no opinion, no facts : this is just a question.. Debates??? I will keep my points for later... I assume Round 1 is for acceptance 

I made a small error. The plus sign should be a minus sign for the price. Q = 125  7.31P + .0030I + .0003Pop. I believe that once the regression is run for say data for a ten year period, take the current values of the explanatory variables except for the price variable and solving the equation for the price, you will then get an equation like this
P = abQ where "P" is the price and "Q" is the quantity. "a" is the P intercept and "b" is the slope. If you have a marginal cost of say "c" then the price that maximizes the demand equation is this P = a [(ac)/2]. In other words all you need to find price that maximizes profits is the P intercept (i.e. the price that demands a zero quantity) and the marginal cost and that is it. Do you agree or disagree with this argument. The equation P = a [(ac)/2] is derived by using calculus (MR = MC)
Try googling your error. There are many websites which may help your matter dear friend 

I have no other argument unless someone out there can challang my lat post
Okay 

pincivma forfeited this round.
dukula forfeited this round. 

pincivma forfeited this round.
dukula forfeited this round. 
Post a Comment
No comments have been posted on this debate.
No votes have been placed for this debate.