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Pricing Strategy - American Baker's Association

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The American Baker's Association reports that annual sales of bakery goods last year rose 15 percent, driven by a 50 percent increase in the demand for bran muffins. Most of the increase was attributed to a reprot that diets rich in bran help prevent certain types of cancer. You are the manager of a bakery that produces and packages gourmet bran muffins, and you currently sell typical consumer's inverse demand for your bran muffins is now P = 3-.5Q. If your cost of producing bran fuffins is C(Q) = Q, determine the optimal number of bran fuffins to sell in a single package and the optimal package price.

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P = 3 -.5Q

Cost = Q

Total Revenue = Price x Quantity

= (3-.5Q) ...

Solution provided by:
Gaurav Agarwal, MS
Education
  • BE, Bangalore University, India
  • MS, University of Wisconsin-Madison
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