# Optimization problem!!

• Oct 9th 2011, 08:43 PM
pmor
Optimization problem!!
You operate a bakery. You buy cakes from a supplier who charges you $6 per cake. Government regulations dictate that you can only charge a price between$12 and $24 per cake. Your research shows that if you were to charge$x per cake, you would sell
180 x2
cakes per week.
(a) How much will you charge per cake?
(b) How much would you charge if there were no government regulations?
• Oct 9th 2011, 09:00 PM
process91
Re: Optimization problem!!
Something seems off about the question. How many cakes would you sell per week? 180x? What's the 2 doing there?

If you'd just sell 180x cakes per week, you'd charge $24 with the government restrictions, and$ $\infty$ without restriction. Obviously this isn't correct...
• Oct 9th 2011, 10:20 PM
rainer
Re: Optimization problem!!
Yeah that sounds pretty weird that the government would impose a minimum price that you can charge. Every cake seller would ignore that and just charge the highest possible price--unless you introduce a demand constraint.

Edit: Oh ok I guess the research you talk about is the demand constraint. Hmmm let me think about this. Right off the bat we know that you cannot maximize profit since max profit occurs where the marginal cost ($6 in this case) equals the marginal revenue or selling price (which cannot fall below$12).
• Oct 9th 2011, 10:22 PM
process91
Re: Optimization problem!!
I see you moved the 2, but the edited problem still doesn't make sense. Can you write out in words how many cakes you would sell per week?