Math 135 Business Calculus Spring 2009

Project: Monopoly Pricing

Here are some hints on the project if you’re having trouble understanding what it’s talking about.
There are two demand functions, one for families living in houses and one for families in apartments.
Your first step is to determine a combined demand function for both types of families
N (p) = Nh (p) + Na (p).
Since the two demand functions are piecewise-defined functions, the combined function will also be a
piecewise-defined function. For p ≤ 100,
Nh (p) = 50 and Na (p) = 50 − 13 p
so
N (p) = Nh (p) + Na (p) = 50 + (50 − 13 p) = 100 − 13 p.
For 100 < p ≤ 150,
Nh (p) = 100 − 12 p and Na (p) = 50 − 13 p
so
N (p) = Nh (p) + Na (p) = (100 − 12 p) + (50 − 13 p) = 150 − 56 p.
For 150 < p ≤ 200,
Nh (p) = 100 − 12 p and Na (p) = 0
so
N (p) = Nh (p) + Na (p) = (100 − 12 p) + 0 = 100 − 12 p.
Finally, for p > 200,
Nh (p) = 0 and Na (p) = 0
so
N (p) = Nh (p) + Na (p) = 0.
Then the combined demand function will be


 100 − 13 p if p ≤ 100

 150 − 5 p if 100 < p ≤ 150
N (p) = 6
 100 − 1

 2 p if 150 < p ≤ 200

0 if p > 200
For the first bullet, you are supposed to graph this function. Note each piece of the graph will be a
straight line segment.
The second step is to compute the revenue. The revenue is
R(p) = (price per hookup) · (number of hookups) = p · N (p).
Since N (p) is a piecewise-defined function, then R(p) will also be a piecewise-defined function. You
need to graph R(p).
The third step is to compute your costs, which are
C(p) = 2000 + 20 · (number of hookups) = 2000 + 20N (p).
Plot this function.
The fourth step is to compute your profit, which is
P (p) = R(p) − C(p) = pN (p) − [2000 + 20N (p)] = (p − 20)N (p) − 2000.
You want to maximize the profit function. It’s helpful if you look at the graph before attempting to
maximize the profit function. This will also be a piecewise-defined function and the critical vallues will
include the points where the derivative does not exist because there’s a corner.