A local area network provider presently serves 2500 homes an

A local area network provider presently serves 2500 homes and charges $10.00 per month. A marketing survey indicates that each decrease of $1.00 per month will result in 500 new customers. Find the monthly charge that will result in the maximum monthly revenue.

Solution

given,

LAN provides presently serves are 2500 with monthly price $10.

by decrease in one dollar 500 new customers will be added.

now,

total customers by decrease of $1 is 3000customers

monthly charge is $9 ($10-$1=$9)

therfore, total monthjy revenue = total customers X Monthly charge

= 3000 Customers * $9

=$ 27,000

but total monthly revenue is maximum at another decrease in $1 i.e.,$8

then total customers are 3500

now total monthly revenue is = 3500*8 = 2800

therefore , maximum monthly revenue is found decrease of $2 with customers 3500 i.e.,2800