Question

Cost, revenue and profit functions may take parabolic forms. In many business and economics applications, our most important goal is to maximize revenue, profit or minimize cost. We may be able to find the price or t and minimizes cost by using quadratic formula and vertex formula. he quantity of goods and maximizes profit, revenue services that The goal of this project is to enhance the understanding quadratic functions and how to find the Question 1: If you have the chance to start a business, what business would you choose? Why? Question 2: Starting and running a business requires time, effort, hard work and in particulan money. What kind of costs do you expect to have to pay in order to start and run your business? Please list them and explain why you need them. Question 3: Some costs are fixed, which are called fixed costs, such as equipments and buildings, Some cost are varied, which are called variable costs, such as labor and material Please explain what costs in the Question 2 are fixed costs, and what are variable costs. In general, the total cost consists of variable costs and fixed costs Question 4: In order to keep your business running, you need to make revenue. Revenue is the money that comes into the business from customers. Suppose you know the number of products your business sold and the price you sold them at, how can you calculate the revenue? What strategies could you use in order to increase your business' revenue? The revenue of a business may go up and down depending on many factors. For example a business that sells ice cream will likely make more money during hot summer months. The profit of your business is the difference of the revenue and the cost. That is, Profit Revenue Cost. If the profit is the positive, your business makes money. If the profit is negative, your business unfortunately makes a loss. If the profit is zero, that is the revenue is equal to the cost, it is called the break-even point Suppose that you were the CEO of a giant high technology corporation, Strawberry, Inc, manufacturer of the Strawberry Phone Question 5: This month, you have estimated the demand for the Strawberry Phone to be: Q 220-4P where Q is the quantity demanded, and P is the price of a Strawberry Phone. The cost of producing a phone is constant at $12, which is called marginal cost. The fixed cost that includes the cost spent on the factory, the equipment, among others is $1525. As a result, you have a linear cost function, C FC(MC Q) Where C is the total cost, FC is the fixed cost, and the MC is the marginal cost, and Q is the quantity as before. Answer the following questions. 1. What is the price that maximizes the corporation's profit? (Hint: Profit Revenue Cost) 2. At what price does the corporation break even? Question 6: The other day, as you are burying yourself in the sea of data, you find out that at $500, your corporation sells on average 50,000 Strawberry Phones, the corporation's flagship product, monthly. Additionally, for every $50 increase in the price of a phone, the sales decrease by 1,000 phones. Based on this information, you are very interested in finding 1. the price point that will maximize the revenue, and; 2. what the maximum revenue is Question 7: From the two questions above, create a strategy to lower your cost and maximize your profit for the business you chose in question 1. Essay: Write an essay that discusses the answers to the questions above include a detailed description of your business ideas and how it is possible to use maximization of quadratic functions to find the maximal profit.

Answer 1

(The first four questions are being answered here)

1) If there is a chance to open a business, I would prefer to open a restaurant. The restaurants are the type of monopolistic competitive markets. The main reason is that in such a market, i would have the opportunity to be unique and to offer products which is different from another and yet target similar consumers. The restaurant could be specifically of the Indian cuisine in an area where the Indian restaurants are rare and this could work as the unique element.

2)In order to start and run the business, the time and efforts of the owners, as well as contribution from the various factors of production, is required which are land, labor and capital. Land or a building for the restaurant which could either be brought or be rented. Renting would require a security deposit and monthly rents while buying would require down payment and EMIs. The cost of interior designing and furniture would also be required.

Then would be the cost of labour. The labour required for renovation or in case the land is bought, for building the restaurant. Then there would be workers who would be serving and maintaining the restaurant like baristas, cleaning staff, cashier, manager etc. All of them would be paid salaries along with other benefits.

The next factor ie capital would also be required. Capital would be in the form of the machines used like a coffee machine or dishwasher or microwave oven. All these require the interest to be paid.

Another important cost would be the cost of advertising and the initial offers. the cost of advertising would be required since it would be a new opening and the consumers would not be knowing the type and quality of restaurants. Signals should be send regarding the quality of food. It could be in the form of positive reviews by the consumers or the blogging and reviews by the chefs. All these would be required for the promotion of the restaurant.

The last is the profits, I would earn as an entrepreneur. All these costs are required to open and run the business.

3) Fixed costs are the costs which are incurred once and do not depend on the units of quantity produced.

Variable costs are the costs which vary with the number of units produced.

In the business of the restaurant, the costs of building, furniture, air conditioners or heater would be fixed costs. These costs are not changing with the unit of quantity produced, atleast in the short run.

The variable costs would be the costs of waiters, raw materials used to make food and other inputs. The costs would increase in peak hours when the customer would be high and reduce in non-peak hours. According the waiters and servers would be employed and the inputs would be required.

4) The revenue is the money that comes from the business which in this case of restaurant. The revenue is important to run the business, but more important is the profit. If the business is not earning profits or the profits are negative, then it is not a profitable venture whereas if the profits are positive, the business can continue.

The revenue is given by the product of the number of units sold and the price at which they are sold. The profit is the difference between the revenue and the costs.

The revenue is higher in the time of peak hours ie the meal times or the times during holidays and festivals. The revenue might be low at times when there is extreme weather conditions etc.

the strategies which are required to increase the profits depend on the elasticity of the goods. If the elasticity is low ie there are no indian restaurants, then the profit could be earned by increasing the prices because of the fact that the elasticity for Indian food is low, fewer substitutes are available. But if there are more in the neighborhood, the elasticity would be high.

The strategies could be bundling of food.Eg: an economic meal for the students at a lower price and a higher price bundle for corporates which might include traditional drinks or any such complimentary food item. A form of price discrimination could be exercised like the happy hours where the prices could be kept low in the nonpeak hours or kids-friendly restaurants which would help attract the families. The restaurant could offer discounts at the home delivery and hence could increase sales. the dishes which are more in demand could be priced a bit higher than the other ones and the revenue could be extracted from them or terms like"chef special", or the" day special " could be used for special high priced dishes.

These strategies could help increase the revenue and hence profits.

(you can comment for doubts)