Revenue/profit and quadratic equations

anasylum

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Jan 16, 2008
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Hi, guys,

Why do most of the revenue and profit equations turn out to be quadratic? I know many revenue functions are linear, but when costs increase after a certain level of production, are quadratic funstions better at predicting the total cost of products?



Thanks
 

stapel

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anasylum said:
Why do most of the revenue and profit equations turn out to be quadratic?
On what basis have you concluded that most revenue or profit models in economics are simple quadratic functions? (Obviously, your homework exercises will be linear and quadratic, because that's what you know how to work with. But that's an entirely different issue.)

I was of the understanding that many models in economics are very much not that simple! :shock:

Kindly provide your documentation. Thank you! :D

Eliz.
 

anasylum

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Jan 16, 2008
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Hi, Elizabeth,

The question I posed was in related to the price-demand equation. In other words, what about the price-demand equation might lead to using quadratic revenue/profit equations?

Thanks
 

Denis

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Feb 17, 2004
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Give an example.
Price-demand can be as simple as:
1st 500: $20 each
next 500: $15 each
over 1000: $10 each
 

stapel

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anasylum said:
The question I posed was in related to the price-demand equation. In other words, what about the price-demand equation might lead to using quadratic revenue/profit equations?
The model developed in any particular instance will vary with the information provided and the information sought. I am not aware of any "rule" which leads "most" of these economics models to be quadratic. Since you are (according to your first post, wherein you wondered why this fact is true), you would probably be closer to knowing the answer to this economics question than are we. :shock:

Eliz.
 
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