The quantity of a product demanded by consumers is a function of its price The quantity of one product demanded may also depend on the price of other products For example, if the only chocolate shop in town (a monopoly) sells milk and dark chocolates, the price it sets for each affects the demand of the other The quantities demanded, q 1 and q 2 , of two products depend on their prices, p 1 and p 2 , as follows q 1 150 2p 1 p 2 q 2 200 p 1 3p 2 (a) What does the fact that the coefficients of p 1 and p 2 are negative tell you Give an example of two products that might be related this way (b) If one manufacturer sells both products, how should the prices be set to generate the maximum possible revenue What is that maximum possible revenue

Question: The quantity of a product demanded by consumers is a function of its price. The quantity of one product demanded may also depend on the

The quantity of a product demanded by consumers is a function of its price. The quantity of one product demanded may also depend on the price of other products. For example, if the only chocolate shop in town (a monopoly) sells milk and dark chocolates, the price it sets for each affects the demand of the other. The quantities demanded, q₁ and q₂, of two products depend on their prices, p₁ and p₂, as follows:

q₁ = 150 − 2p₁ − p₂

q₂ = 200 − p₁ − 3p₂.

(a) What does the fact that the coefficients of p₁ and p₂ are negative tell you? Give an example of two products that might be related this way.
(b) If one manufacturer sells both products, how should the prices be set to generate the maximum possible revenue? What is that maximum possible revenue?

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