Maximizing Profits
Not what you're looking for?
I have a website where I offer cash rebates for buying stuff. For instance, if someone purchases a pair of shoes, I give them a $10 cash rebate. For that particular sale I will receive a commission of say, $25, so my net revenue from that offer is $15. The goal is to offer a rebate that is large enough that lots of people are incentivized to purchase the pair of shoes, but not so large that I will be giving most of my commissions away in the form of cash rebates. I have tested the number of shoes sold at 2 different cash rebates so I have two sets of coordinates for the demand function where x is the payout and y is the number of shoes sold.
They are (5,15) and (10,40). We can assume that the slope is linear.
I want to find the size of the cash rebate that maximizes total profits.
How would I do this?
Purchase this Solution
Solution Summary
The solution calculates size of rebate that maximizes total profits.
Solution Preview
Please see the attached file:
I have a website where I offer cash rebates for buying stuff. For instance, if someone purchases a pair of shoes, I give them a $10 cash rebate. For that particular sale I will receive a commission of say, $25, so my net revenue from that offer is $15. The goal is to offer a rebate that is large enough that lots of people are incentivized to purchase the pair of shoes, but not so large that I will be giving most of my commissions away in the form of cash rebates. I have tested the number of shoes sold at 2 different cash rebates so I have ...
Purchase this Solution
Free BrainMass Quizzes
Economics, Basic Concepts, Demand-Supply-Equilibrium
The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.
Pricing Strategies
Discussion about various pricing techniques of profit-seeking firms.
Elementary Microeconomics
This quiz reviews the basic concept of supply and demand analysis.
Economic Issues and Concepts
This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.
Basics of Economics
Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.