Question 2. TJ runs a side business called TJ's Tikoy Shop that becomes busy every year around the New Year selling tikoy (rice cakes/). To prepare for the rush, he hires extra staff to help fill the order. Each additional staff member is paid at the rate of $20 per hour, and can produce 40 orders per hour. Moreover, staff need to be provided with adequate safety equipment at work, which costs TJ $30 per staff member, and a supervisor needs to be hired at a rate of $27 per hour to help manage staff. Based on historical data, TJ has modeled the demand for tikoy using the equation q= 1200+80(30 - p) where p is the price of each order and q is the quantity demanded in number of orders. The cost of raw ingredients, packaging, and shipping depends on quantity produced, and come out to a total of $10 per order. Meanwhile TJ also incurs a fixed cost of $500 for the entire operation (for social media advertising, etc). (a) If TJ sets the price at $30 per order, determine the number of staff TJ should hire in order to incur the minimum possible cost. (b) TJ is having a hard time finding staff to work during the holidays, and can only hire three regular staff (and one supervisor). Now find the price point p that will maximize the shop's profit.
Question 2. TJ runs a side business called TJ's Tikoy Shop that becomes busy every year around the New Year selling tikoy (rice cakes/). To prepare for the rush, he hires extra staff to help fill the order. Each additional staff member is paid at the rate of $20 per hour, and can produce 40 orders per hour. Moreover, staff need to be provided with adequate safety equipment at work, which costs TJ $30 per staff member, and a supervisor needs to be hired at a rate of $27 per hour to help manage staff. Based on historical data, TJ has modeled the demand for tikoy using the equation q= 1200+80(30 - p) where p is the price of each order and q is the quantity demanded in number of orders. The cost of raw ingredients, packaging, and shipping depends on quantity produced, and come out to a total of $10 per order. Meanwhile TJ also incurs a fixed cost of $500 for the entire operation (for social media advertising, etc). (a) If TJ sets the price at $30 per order, determine the number of staff TJ should hire in order to incur the minimum possible cost. (b) TJ is having a hard time finding staff to work during the holidays, and can only hire three regular staff (and one supervisor). Now find the price point p that will maximize the shop's profit.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Solve part a and b of question. Please show all steps and explain. Note: it’s a optimization problem
Transcribed Image Text:Question 2. TJ runs a side business called TJ's Tikoy Shop that becomes busy every year around the New Year
selling tikoy (rice cakes/). To prepare for the rush, he hires extra staff to help fill the order. Each additional
staff member is paid at the rate of $20 per hour, and can produce 40 orders per hour. Moreover, staff need to be
provided with adequate safety equipment at work, which costs TJ $30 per staff member, and a supervisor needs to
be hired at a rate of $27 per hour to help manage staff.
Based on historical data, TJ has modeled the demand for tikoy using the equation
q= 1200+80(30 - p)
where p is the price of each order and q is the quantity demanded in number of orders. The cost of raw ingredients,
packaging, and shipping depends on quantity produced, and come out to a total of $10 per order. Meanwhile TJ
also incurs a fixed cost of $500 for the entire operation (for social media advertising, etc).
(a) If TJ sets the price at $30 per order, determine the number of staff TJ should hire in order to incur the minimum
possible cost.
(b) TJ is having a hard time finding staff to work during the holidays, and can only hire three regular staff (and one
supervisor). Now find the price point p that will maximize the shop's profit.
zoom
point.
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