3.2 Quadratic functions  (Page 5/14)

Revenue is the amount of money a company brings in. In this case, the revenue can be found by multiplying the price per subscription times the number of subscribers, or quantity. We can introduce variables, $p$ for price per subscription and $Q$ for quantity, giving us the equation $\text{Revenue}=pQ.$

Because the number of subscribers changes with the price, we need to find a relationship between the variables. We know that currently $p=30$ and $Q=84,000.$ We also know that if the price rises to $32, the newspaper would lose 5,000 subscribers, giving a second pair of values, $p=32$ and $Q=79,000.$ From this we can find a linear equation relating the two quantities. The slope will be

This tells us the paper will lose 2,500 subscribers for each dollar they raise the price. We can then solve for the y -intercept.

This gives us the linear equation $Q=\mathrm{-2,500}p+159,000$ relating cost and subscribers. We now return to our revenue equation.

We now have a quadratic function for revenue as a function of the subscription charge. To find the price that will maximize revenue for the newspaper, we can find the vertex.

The model tells us that the maximum revenue will occur if the newspaper charges $31.80 for a subscription. To find what the maximum revenue is, we evaluate the revenue function.