The Analysis of Profit Maximisation Can Be Obtained in the Business of Tim and Emma in Advertising

The analysis of profit maximisation can be obtained in the business of Tim and Emma in advertising

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Introduction

Profit maximisation is always the priority and goal of a company to achieve. Indeed, the production cost has occupied a large proportion of the revenue which causes the business cannot maximise its profits. However, a critical decision-making can assist a business to get rid of the problems and enhancing the system to operate the company. In case of Tim and Emma’s business, consumer surplus will be one of the factors that customers take into account. Consequently, the revenue will be affected by the differentiation of the charging on each click.

Question a,

An analysis of the relationship between the cost per click and the number of clicks.

Approach

In this question, survey and correlation and regression are the methods used in question A in an attempt to illustrate the relationship between the cost per tickets and the number of tickets.

Data analysis

[pic 1] fig. 1.1

[pic 2] fig. 1.2

As providing additional information, the mean of the number of clicks and the cost per click are 207.87 and £1.76 respectively.

As the fig. 1.1 above represents, it can be defined as high positive correlation due to the correlation in fig. 1.2 has been shown as 0.86. According to fig 1.1, the data shows the relationship as high and positive which supported by the data in fig. 1.2 with r=0.86 (which nearly to 1). Also, fig. 1,1 reflects the business of Tim and Emma will not be affected by the fixed cost as it is an online production. The cost of production will increase proportional as the number of clicks increased, however, there is an outlier at the price with £2.00 with 25 clicks. As the information is not provided sufficiently, thus, it is difficult to find out the reason(s) leading to.

Question b,

If they do not use the marketing company, what cost per click should Tim and Emma use? Show all your analysis and explain the reasons for your answer. Include comments on whether £3.00 per click is a good option to use.

Approach

In order to find out the solution of question b, a simple algebra will be used as figuring out the number that will changed from visitors on the internet to real customers, calculating the profit between revenue and cost as the diagram shown below in data analysis.

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