The Price Decrease Effect on Monthly Revenue: A Case Study on Sugar Prices

In the realm of economics, the relationship between price reduction and the consequent increase in consumption is a critical topic. This study delves into a specific scenario concerning sugar prices and explores the resulting impact on monthly revenue.

Scenario Overview

The market dynamics for sugar have led to a 7.5% reduction in its price per kilogram. Simultaneously, there has been a 20% increase in the consumption of sugar. This situation prompts the question: What is the percentage increase in revenue due to these changes?

Mathematical Representation

Let us denote the initial and final prices of sugar as P1 and P2, and the initial and final consumption as C1 and C2 respectively. Revenue is calculated as the product of price and consumption, represented as R P × C.

Initial Price, P1 100/ per kg Initial Consumption, C1 10 Kg Final Price, P2 100 ? (7.5/100 × 100) 92.5/ kg Final Consumption, C2 10 (20/100 × 10) 12 Kg

Calculations

Step 1: Calculate the Final Price as a Fraction of the Initial Price:

P2 (100 - 7.5) / 100 × P1 92.5 / 100 × P1 37 / 40 × P1

Step 2: Calculate the Final Consumption:

C2 10 20 / 100 × 10 1.2 × C1 6 / 5 × C1

Step 3: Calculate the Final Revenue:

Equation:

R2 P2 × C2

R2 (37 / 40) × (6 / 5) × P1 × C1

R2 111 / 100 × R1

Therefore, the increase in revenue can be calculated as:

R2 111 / 100 × R1

Equivalently, R2 1.11 × R1

Hence, the revenue increases by 11%.

Example Calculation

For a practical example, consider the initial conditions:

P1 100/ per kg C1 10 Kg

At an initial price, the revenue:

R1 P1 × C1 100 × 10 1000

After the price reduction:

P2 92.5/ per kg C2 12 Kg

The new revenue:

R2 P2 × C2 92.5 × 12 1110

The increase in revenue:

1110 - 1000 110

The percentage increase in revenue:

(110 / 1000) × 100 11%

Conclusion

Through this analysis, it is evident that a 7.5% reduction in the price of sugar and a 20% increase in consumption leads to a 11% increase in monthly revenue. This example underscores the importance of understanding price elasticity in the context of revenue generation.

Relevance to SEO:

By delving into this case study, SEO professionals can understand the impact of price changes on consumer behavior and revenue, which is a key factor in content optimization. The keywords revenue increase, price reduction, and consumption increase highlight the economic principles involved and can help in optimizing website content for more effective SEO.