some venture capitalists learned in economics that total revenue is th
Some venture capitalists learned in economics that total revenue is the
total receipts a seller receives from selling goods to buyers, and that it
can be written as P x Q, which is the price of goods times the quantity of
goods sold. They hold the plans to the next "hot" technology gizmo that
everyone will want to buy. In pricing the item, they made some
assumptions: 1) For small quantities purchased, set the price low to
invite people to get familiar with the product. 2) For large quantities
purchased, set the price low as preferential treatment for your best
customers. 3) Limit the number that can be purchased to a maximum of
1000 units. 4) An analyst recommends that the selling price for 500 units
be $2500, or you will price yourself out of the market. They have hired
you as a consultant to make a recommendation about what the
maximum revenue will be for the company under this business plan.
Even though the units may be sold in different quantities, the central
question to ask is, "If all the purchases involved the same exact number of items,
what would be the revenue for the company under that condition, and when would the
revenue be as big as possible?" This would provide a ceiling figure to report
back to the investors.
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