Demand and Profit In order to generate a profit from its o’Books e-book service, OHaganBooks.com needs to know how the demand for novels depends on the price it charges. During the first month of the service, it was charging $10 per novel, and sold 350. Lowering the price to $5.50 per novel had the effect of increasing demand to 620 novels per month.
a. Use the given data to construct a linear demand equation.
b. Use the demand equation you constructed in part (a) to estimate the demand if the price was raised to $15 per novel.
c. Using the information on cost given in Exercise 40, determine which of the three prices ($5.50, $10 and $15) would result in the largest profit, and the size of that profit.
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Break-Even Analysis OHaganBooks.com also generates revenue through its o’Books e-book service. Author royalties and copyright fees cost the company an average of $4 per novel, and the monthly cost of operating and maintaining the service amounts to $900 per month. The company is currently charging readers $5.50 per novel.
a. What are the associated cost, revenue, and profit functions?
b. How many novels must be sold per month in order to break even?
c. If the charge is lowered to $5.00 per novel, how many books must be sold in order to break even?
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