An optimal price is the maximum price a business can charge for a good to maximize revenue. In other words, it is the best balance between price and demand.
The formula to calculate the Optimal Price (OP) is:
\[ OP = MC \cdot \left( \frac{PD}{PD + 1} \right) \]
Where:
Let's say the marginal cost (MC) is 50 and the price elasticity of demand (PD) is 2. Using the formula:
\[ OP = MC \cdot \left( \frac{PD}{PD + 1} \right) = 50 \cdot \left( \frac{2}{2 + 1} \right) = 50 \cdot \left( \frac{2}{3} \right) \approx 33.33 \]
So, the Optimal Price (OP) is approximately 33.33.
