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Contribution margin-based pricing maximizes the profit derived from an individual product, based on the difference between the product's price and variable costs (the product's contribution margin per unit), and on one's assumptions regarding the relationship between the product's price and the number of units that can be sold at that price.
Contribution margin (CM), or dollar contribution per unit, is the selling price per unit minus the variable cost per unit. "Contribution" represents the portion of sales revenue that is not consumed by variable costs and so contributes to the coverage of fixed costs. This concept is one of the key building blocks of break-even analysis. [1]
The equation below (in Cobb–Douglas form) is often used to represent total output (Y) as a function of total-factor productivity (A), capital input (K), labour input (L), and the two inputs' respective shares of output (α and β are the share of contribution for K and L respectively). As usual for equations of this form, an increase in ...
The Lydersen method is the prototype for and ancestor of many new models like Joback, [2] Klincewicz, [3] Ambrose, [4] Gani-Constantinou [5] and others. The Lydersen method is based in case of the critical temperature on the Guldberg rule which establishes a relation between the normal boiling point and the critical temperature .
Suppose that k = 2 (usually, k is assumed to be in (0,1)). This equation implies that if Y rises by 10, then net investment will equal 10×2 = 20, as suggested by the accelerator effect. If Y then rises by only 5, the equation implies that the level of investment will be 5×2 = 10.
The simplest form of a group-contribution method is the determination of a component property by summing up the group contributions : [] = +.This simple form assumes that the property (normal boiling point in the example) is strictly linearly dependent on the number of groups, and additionally no interaction between groups and molecules are assumed.
The group's total payoff is maximized when everyone contributes all of their tokens to the public pool. However, the Nash equilibrium in this game is simply zero contributions by all; if the experiment were a purely analytical exercise in game theory it would resolve to zero contributions because any rational agent does best contributing zero, regardless of whatever anyone else does.
Indifference map with two budget lines (red) depending on the price of Giffen good x. In microeconomics and consumer theory, a Giffen good is a product that people consume more of as the price rises and vice versa, violating the law of demand.