Condition 2 - Economics Video Lecture | Economics CUET Preparation - Commerce

now what is the second order condition
for profit maximization it'll be that d
2 pi by DQ 2 should be less than equal
to 0 at Q equals to Q star at Q equals
to Q star it should be less than equal
to 0 that is marginal profit must be
decreasing at the optimal level of Q
marginal profit must be decreasing at
the optimal level of Q
okay that is if you look at this you'll
find this when you were selling only two
units your profit was twelve when you
started selling three units you've
profit went to fifteen right so what is
the what is the marginal profit which
you are getting from here is plus three
when you started selling one more unit
it is your marginal profit went up to
one then then you started selling the
fifth unit the marginal profit went down
to one then it went down to minus three
right and then it went down to minus
five and so on
fine so at this point when when you are
selling your Q equals two for the module
profit is maximum and after this it has
started falling it has started falling
right so so you can you can probably
would have seen this table in our
earlier recording in profit maximization
meaning and from there you can you can
understand this that at this point this
in these is the profit max okay at this
point your marginal profit has started
falling and you can also show that at
this point your MC is equal to M R okay
what is the marginal revenue which you
are getting out of this at at at this
what is the marginal revenue which you
are getting from here it is three from
here it is one from here it is minus one
from here it is minus three and so on
and your marginal cost is two everywhere
so in between somewhere your three and
five it should be your profit
maximization point and this indeed is a
profit maximization point because after
this point your module profit has
started falling so marginal profit must
be decreasing at the optimal level of Q
so for Q less than Q star for Q less
than Q star
profit must be increasing profits must
be increasing that is your
del PI by Del Q should be greater than 0
and 4q greater than Q star
profit must be falling that is del PI by
Del Q is less than zero right now only
if this condition is holding then it is
it has a true maximum of profits which
has been achieved well