Revenue Function And Profit Function

A cost function of the form.

Revenue function and profit function. If r x is the total revenue and c x is the total cost then profit function p x is defined as p x r x c x some standard. In symbols π r c p q f v q. Cost revenue and profit functions cost functions cost is the total cost of producing output. Enjoy the videos and music you love upload original content and share it all with friends family and the world on youtube.

To obtain the profit function subtract costs from revenue. This means differentiate the cost revenue or profit. Profit income cost. C x mx b.

Thus c x is the cost of x items. Marginal revenue is the change in aggregate revenue when the volume of selling unit is increased by one unit. The equation for the cost function is. The excess of total revenue over the total cost of production is called the profit.

π r c 1 2 q. This also implies that the profit function equals zero at break even points. 4 a company s break even points occur where the revenue function and the cost function have the same value. Profit function p x total income minus total cost.

Cost revenue and profit functions. Since profit is the difference between revenue and cost the profit functions the revenue function minus the cost function. The cost function consists of two different types of cost. 0 1 2 q 40 000 or q 40 000 1 2 33 334 units.

An equivalent approach is to find the value of q where the revenue function and cost function have identical values. Marginal revenue r x the derivative of r x. And the intercept b is called the. C 40 000 0 3 q where c is the total cost.

This function is extremely useful it can tell us for example how many glasses of lemonade we would need to sell to. Specifies the cost c as a function of the number of items x. The quantity mx is called the. Profit 0 50 x 50 00 0 10 x 0 40 x 50 00.

3 the profit a business makes is equal to the revenue it takes in minus what it spends as costs. P x r x c x marginal is rate of change of cost revenue or profit with the respect to the number of units. Note we are measuring economic cost not accounting cost. One is to solve for the value of q that makes the economic profit function equal to zero.

For our simple lemonade stand the profit function would be. The profit function is just the revenue function minus the cost function.