Optimal pricing - part 1

In this lesson

1. 0:00 Optimal pricing and profit maximisation
2. 1:02 Understanding demand curves and price relationships
3. 2:16 Demand curve equation explained
4. 3:37 Finding the gradient of demand curves
5. 5:00 Deriving demand curve from market research
6. 7:38 Identifying demand function components

About this lesson

The video covers the fundamentals of demand curves and introduces the price equation: p = a − bx. Here, p is the selling price, x is the quantity demanded, a is the price intercept (the theoretical maximum price at which demand reaches zero), and b is the gradient of the demand curve (showing how sensitive demand is to price changes). You'll learn how to calculate both constants using real market data, then use the resulting equation to determine what price to charge for any desired sales volume, or vice versa. Through a worked example, you'll see how to extract information from market research—such as the relationship between price changes and demand shifts—and translate it into the demand equation. This practical skill is essential for Performance Management and Financial Management papers, where pricing decisions directly impact profit outcomes. Understanding this foundation prepares you for the more advanced profit-maximisation calculations that follow.

Duration: 9m