
Economics Economics Forum  Financial Mathematics, Econometrics, Operations Research, Mathematical Finance, Computational Finance 
 LinkBack  Thread Tools  Display Modes 
September 9th, 2017, 07:22 AM  #1 
Newbie Joined: Sep 2017 From: Latvia/Denmark Posts: 21 Thanks: 0  TR and MR
Hello! I am not quite sure what do I need to do here. Help would be appreciated! Last edited by skipjack; September 9th, 2017 at 08:13 AM. 
September 9th, 2017, 08:16 AM  #2 
Global Moderator Joined: Dec 2006 Posts: 20,978 Thanks: 2229 
TR = PQ = 100Q  4Q² What definition have you been given for MR? 
September 10th, 2017, 03:18 AM  #3 
Newbie Joined: Sep 2017 From: Latvia/Denmark Posts: 21 Thanks: 0  Yet, I do not see and understand why and what does the 0.3 and 12 mean in this context. I don't get how you get the answer too. Last edited by skipjack; September 10th, 2017 at 03:55 AM. 
September 10th, 2017, 04:48 AM  #4 
Global Moderator Joined: Dec 2006 Posts: 20,978 Thanks: 2229 
P is the price of a unit of production and Q is the number of units produced. Hence TR (Total Revenue) = P × Q. If P were a constant, d(TR)/dQ would be P, which would be exactly the extra revenue caused by producing 1 more unit. If P isn't constant, but is given as a function of Q, it's reasonable to use d(TR/dQ) to estimate the change in TR due to a change in Q. If TR = Q(100  4Q) = 100Q  4Q², MR = d(TR)/dQ = 100  8Q. You are probably expected to substitute Q = 12, to get MR = 4. As that would be an estimate of the change in TR due to a 1 unit increase in output, you need to multiply it by 0.3, giving 1.2 as your estimate of the change in TR due to a 0.3 unit increase in output. As the question is about an increase in Q from 12 to 12.3, you might wonder why I substituted Q = 12 rather than Q = 12.3. Indeed, why not choose to "split the difference" by substituting Q = 12.15? That would give MR = 2.8, so that your answer would be 0.3 × 2.8 = 0.84, which is a better estimate (spot on, in fact). Since when have economists been concerned about accuracy, though? I suggest you do what you were taught if you can. 
September 10th, 2017, 06:09 AM  #5  
Newbie Joined: Sep 2017 From: Latvia/Denmark Posts: 21 Thanks: 0  Quote:
 