The demand function (in Rs.) for a product is given by $P= 20 -0.25x$, where P is the price per unit and x is the number of units sold, then the price of one unit, when the revenue is maximized, is:
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → Rs.10
Given demand function: P = 20 - 0.25x
Revenue: R = $P \cdot x = (20 - 0.25x)x = 20x - 0.25x^2$
Maximize revenue by differentiating with respect to x:
$\frac{dR}{dx} = 20 - 0.5x = 0$
0.5x = 20
x = 40 units
Price per unit when revenue is maximum:
P = 20 - 0.25 × 40 = 20 - 10 = 10 Rs.