and Complete Solutions | 2026 Update | UCSD
Profit Equation
Profit = Total Revenue - Total Costs
or
Profit = (Price X Quantity Sold) - Total Costs
Price
the assignment of value, or the amount the consumer must exchange to receive
the offering
Relationship between price and demand
inverse relationship
How would you get an increase in demand without changing price?
Scarcity
Elasticity
a change in price results in great change in quantity demanded
,Inelasticity
a change in price results in little to no change in quantity demanded
Fixed Costs
don't change with number of units produced
Variable Costs
production costs that are tied ti the number of units produced
Breakeven Point
costs of producing a product equal the revenue made from selling the product
Types of Variable Costs
raw materials, credit card fees, sales commissions
Types of Fixed Costs
rent, insurance, salary, loan repayment
, What is more favorable to investors?
A higher proportion of variable costs to fixed costs
Breakeven Point (Quantity) Equation
Fixed Costs/Contribution Unit Margin
Contribution Margin
the difference between the total revenue and total variable costs
Contribution Unit Margin Equation
Price - Variable Costs
How do you calculate a breakeven price?
Add the amount of profit you want to make to the fixed costs of the equation
1. Type of product
2. Type of target market