Where did they get 1600?
Where did they get 200P?
How did they get the price equation of P=8-Q/200?
A television station is considering the sale of promotional DVDs. It can have the DVDs produced by one of two suppliers. Supplier A will charge the station a set-up fee of $1,200 plus $2 for each DVDs; supplier B has the no set-up fee and will charge $4 per DVD. The station estimates its demand for the DVDs to be given by Q = 1,600 - 200P, where P is the price in dollars and Q is the number of DVDs. (The price equation is P = 8 - Q / 200).
· Suppose the station plans to give away the videos. How many DVDs should it order? From which supplier?
· Suppose instead that the stations seeks to maximize its profits from sales of the DVDs. What price should it charge?
How many DVDs should it order from which supplier? (Hint: Solve two separate problems, one with supplier A and one with supplier B, and then compare profits. In each case, apply the MR = MC rule.)