Name: _________________________________ Activity 1

Linear Cost, Revenue, and Profit Models

The cost to make a sofa is $600 per sofa plus a fixed setup cost of $4,500. Each sofa sells for $750.

1. What is the cost to manufacture 20 sofas? $ _____________________________________________

Hint: Remember to include the setup cost along with the manufacturing cost for 20 sofas at $600 each.

2. What is the cost, in dollars, to manufacture x sofas? C(x) = _________________________________

3. How much revenue is generated from selling 20 sofas at $750 each? $ _____________________

4. How much revenue, in dollars, is generated from selling x sofas? R(x) = ________________________

5. How much profit does the company gain (or lose) by making and selling 20 sofas? $___________________
Checkpoint: Did you find that the company loses $1500? If not, subtract the answer to 1 from 3.

6. How much profit, in dollars, is gained or lost from selling x sofas? P(x) = ______________________________

• Total Cost function: C(x) = cx + F gives the total cost for making x units at a unit cost of c and fixed costs F.
This is the money paid out by the company.
• Revenue function: R(x) = sx gives the total revenue from making and selling x units at the selling price s.
This is the money brought in by the company.

• Profit function: P(x) = R(x) – C(x) = sx – (cx + F) = (s – c)x – F gives the total profit from making and selling
x units. This is the net amount of money the company will have after paying all of its expenses.

The linear Cost, Revenue, and Profit functions for this problem are: C(x) = 600x + 4500, R(x) = 750x,
and P(x) = 150x – 4500

7. How many sofas must be sold in order to have a profit of $12,000? ____________ sofas

8. Which of these three linear models has a positive y-intercept? __________

Why? _______________________________________________________________________

9. Which of these three linear models contains the origin? __________

Why? _______________________________________________________________________

10. Which of these three linear models has a negative y-intercept? __________
Why? _______________________________________________________________________

Math 140-Epstein Spring 2021

 Supply and Demand Models
Demand
The quantity demanded of a computer monitor is 7,500 units when the unit price is $750. At a unit price of
$700, the quantity demanded increases to 9,000 units. Assume this relationship is linear.

Let x be an independent variable representing the number of monitors consumers are willing to buy. Let p be
the dependent variable representing the unit price. Express ordered pairs as (x, p).

1. If the unit price is $750, what is the value of x? (x, p) = ( ________, ________)

2. If the quantity demanded is 9,000 units, what is the value of p? (x, p) = ( ________, ________)

3. Find the slope of the line determined by the two points in 1 and 2. You should find m = - 1
30

4. Find the equation of the line determined by the two points found in 1 and 2. This is the demand equation.

A demand equation expresses the relationship between the unit selling price and the quantity
demanded by consumers.

5. What should generally be true about the slope, y-intercept and domain of a demand function?

Supply
The manufacturer will not market any of the computer monitors if the price is $600 or lower. However, for each
$50 increase in the unit price above $600, the manufacturer will produce 1000 additional units. Assume this
relationship is linear.

Let x be an independent variable representing the number of monitors suppliers are willing to produce. Let p be
the dependent variable representing the unit price. Express ordered pairs as (x, p).

6. How many monitors is the manufacturer willing to produce at a price of $600? (x, p) = ( _______, _______)

7. What is the value of x at a price of $650? (x, p) = ( _______, _______)

8. Find the equation of the line determined by the points found in 6 and 7. This is the supply equation.

The supply equation expresses the relationship between the unit selling price and the quantity
supplied by the producers.

9. What should generally be true about the slope, y-intercept and domain of a supply function?

Math 140-Epstein Spring 2021