Did you know?
Did you know that the profits of a firm can be affected by changes in price? In this scenario, the firm's supply function is given by S(p) = 4p, meaning that the quantity supplied (S) is four times the price (p). Additionally, the firm has fixed costs of 100. Now, if the price changes from 10 to 20, we can calculate the change in profits. The initial profit can be calculated by subtracting the total costs (fixed costs) from the total revenue. With a price of 10, the quantity supplied would be 4 times 10, which equals 40. Therefore, the initial revenue would be 10 multiplied by 40, which equals 400. Subtracting the 100 fixed costs, the initial profit would be 300. Now, with a price of 20, the quantity supplied would be 4 times 20, which equals 80. Therefore, the new revenue would be 20 multiplied by 80, which equals 1600. Again subtracting the 100 fixed costs, the new profit would be 1500. To calculate the change in profits, we simply subtract the initial profit (300) from the new profit (1500). Therefore, the change in profits would be an increase of 1200.
