Question

(3) Suppose that a perishable item costs $6 and sells for $10. Any item that is not sold by the end of the day can all be sold at half price, i.e., $5 (the loss is reduced by $5). (a) Find MP and ML = 120 The table below reveals the discrete demand for this item. (b) Complete the last column of the table. Demand P(Demand = this level) P(Demand this level) 100 0.05 110 0.10 0.15 0.15 140 0.20 150 0.25 160 0,10 (c) Use the marginal analysis to determine how many units should be stocked. 130 Analysis: Conclusion:

Answer 1

3. (a).

Marginal Price is pricing technique, in which products are priced at level, just to cover cost of producing an additional units.

Here Cost of product is $6

Hence, In this case MP = $6.

3. (a).

Marginal Loss refers to, loss that firm has to incur to produce additional units of a product.

In this case, Cost per unit is $6,

And the firm sells product at a half price(ie.$5) than usual price, when products being not sold at the end of the day.

So ML = Cost - Half Price

Therefore ML = $6 - $5

=〉 $1

Hence, ML. = $1

3. (b).

Demand P(Demand=this levell 100 110 120 P (Demanda, this levellie CCFL 0.05 0.15 0.30 0.45 0.65 0.90 1.00 o.os 0.10 o.15 0.15 0. 20 0.25 0.10 130 140 150 160

3(c).

Demand x P (Demand this levell = Unit should be a Stocked Narginal Analysis - t ext, 100 x \\o_x - - - 7 0 xxxxxxx 0 0.05 c.\5 0.30 . HS 0.60 0.96 \.00 130x 140x = SA 16.5 36 S8.5 34 135 160 160

Analysis: As Demand goes on increasing, P(Demand=> this level) Increases, then units should be stocked will also increase simultaneously .(which explains, how many number of units should be stocked for the maximum level of profit as firm can earn.)

Conclusion: As per Marginal analysis, If firm will operates as calculated above, them firm will gain as maximum as possible.(ie. Firm can reduce marginal loss, and could minimize units of unsold stock at the end of the day.)