A companys revenue from car sales R in thousands of dollars

A company\'s revenue from car sales, R. in thousands of dollars, is a function of advertising expenditure, a. also in thousands of dollars. So R = f(a). What does the company hope is true about the sign of f\' Why? Suppose the company has been spending S1 00.000 on advertising. If f\'(100) = 2, should the company spend more or less than $100,000 on advertising? Why? If f\'(100) = 0.5, should the company spend more or less than $100,000 on advertising? Why?

Solution

R = f(a)

a) Company would hope that sing of f\' is +ve which means that car

sales increases with increase in advertising expenditure

b) If f\'\'(100) = 2 .It means that car sales is 2 thousand dollars for 1 thousand dollar spent inadvertising.So, company can keep spending $100,000.

If f\'(100) = 0.5 .It means that for 1 thousnd dollar thecar sales is just 0.5 thousand dollars .So, it need to spend less

to get f\'(100) > 1