CMA Foundation · Fundamentals of Business Economics and Management · The Fundamentals of Economics
A linear demand function for a product is Q = 120 − 4P, where Q is quantity in units and P is price in rupees. At what price will the quantity demanded be 40 units, and what is the total revenue at that price?
The price is ₹20 and revenue is ₹800. Setting 40 = 120 − 4P gives P = 20, and total revenue is price times quantity, 20 × 40 = ₹800. Substituting P = 20 back into the demand function confirms a quantity of 40 units.
- AP = ₹20 and revenue ₹800Correct
- BP = ₹30 and revenue ₹1,200
- CP = ₹20 and revenue ₹1,200
- DP = ₹30 and revenue ₹800
Explanation
Set 40 = 120 − 4P, so 4P = 80 and P = 20. Revenue = 20 × 40 = ₹800. Check: 120 − 4×20 = 40. The ₹30 options come from wrongly dividing 120 by 4, and ₹1,200 arises from multiplying 30 by 40.
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