Ron, we needed the market research. I think we found the segment that we can make more money of. >> Okay, right. >> Let's call it segment two, and the reason why I say it looks more attractive is because when you look at the demand function and a plotting here, quantity on x-axis and price on the y-axis. The demand function was Quantity is 12 minus p. So you might recall we are starting off higher. >> Uh-huh, And then this is going down and gets more shallow >> That's right [CROSSTALK] because you had minus two p so they are less price sensitive. >> Okay. >> So plotting this out quickly here, It basically goes from 12 from price because it's zero here and zero there. This is our demand curve. >> Okay. >> And just, I'm rewriting it right away to keep it simple for me. It goes over here, that go, comes over there. So it's 12 minus Q. >> And that's just your inverse demand function okay same thing I did last time. >> That's right. Now serving this segment comes at a higher cost. >> Okay. >> So our marginal Cost is not two as in your example. It will be three. >> Okay, why do you think that a segment with those particular demand specifications would cost more to serve than the one that I was showing? >> Well it's hard to convince them into pay more money for the exact same thing. >> Okay. >> So we probably have to make the product better with more features. >> Okay. >> You might not even find those same customers in the same channels, so we have to sell through challenge to them more expensive. >> Okay, understood. >> Now we do the exact same math that you had. We want to get to the marginal revenue, and then solve for marginal revenue equals marginal cost. >> Okay. >> So the revenue is P times Q and just writing it all the same way that is 12 minus Q times Q. >> Okay. >> And that is 12 Q minus Q square. >> Okay, you're just distributing it through, okay. >> And now doing the derivative over quantity is 12 minus 2Q. >> Okay. >> And again, if you want to refresh your memory on how to do derivatives, go to the extra materials and look at this little chapter. >> I'll tell you what helps me a little bit is to see it graphically. That makes it more intuitive to me, to see the marginal cost and marginal revenue. >> Great point. >> Yeah, sure. We can graph that. >> Here we have three >> And that is constant so it doesn't change. This is our marginal cost and now this function, it starts again at 12. >> Uh-huh. >> It becomes zero when Q is equals six so that's in the middle of here, And that would be the margin of revenue function. >> All right. And there is that spot again. >> That's the spot [CROSSTALK] that we actually solving for. >> Exactly.. So, let's get to that one. We have Now the marginal revenue, which was 12 minus 2Q equals marginal cost three. Q equals Equals. We get this over. We get this over there. It's twelve minus three divided by two and that is nine divided by two is 4.5 >> Okay. Got it. >> And to get to the right price we put this into this function again so we have. P equals 12 minus 4.5, and how much is that? 7.5. >> 7.5, yeah. All right, so our price is higher I can tell that price is higher than previous example, I guess we should expect that because it's the demands sensitivity differences. >> So, what we got we said Q is 4.5 and the price here is 7.5. Okay. >> And you know what? I put a little start in here because they're really optimal. >> Okay. All right so that's the price we're going to charge to make this happen. >> Now we're really solving for profits so let's calculate that. >> Yeah. >> Profit is. Revenue minus cost, and well, the total revenue is quantity times price. And in our example that is 4.5 times 7.5. And that is 33.75. >> All right, I'll trust your math on that. >> No, I had to look it up. >> Yeah. >> And the cost is Q times C and we have Q was 4.5 times three, and that is 13.5. >> Okay. Now you're just taking the marginal cost and multiplying it by the amount you're selling to get the amount of [INAUDIBLE] product. >> That's right. I'm just doing it in absolute terms. >> All right. Yes. >> Now we have 33.3 quarters minus 13 and a half. And that should be 20 and a quarter. >> Wow. That is a lot more profit [INAUDIBLE]. >> Remind me of what was the value segment one? >> I don't remember the actual number we used for segment one. I just remember it was a single digit number. So. >> [CROSSTALK] >> You are more than twice. >> [CROSSTALK] >> We have before just based on that particular difference. >> I think it's great to find more value. >> Great. That's really interesting. See you've just made a really kind of a small looking change to that it produce a huge >> [CROSSTALK] >> Yeah. >> So, this is I think this illustrates how powerful elasticity is and the price sensitivity of the customer your serving. >> That's great.