Demand for bikes has suddenly increased, and the market price has risen from $50 to $60 how this change will affect profits.

Profit will increase in each bike sold. There is already an additional increase in profit when the price is increased at $60 aside from the fixed profit at normal price of $50, however we can take advantage of further increase in profit if we can supply the demand. We can multiply the increase in profit through the increase of supply until the demand is satisfied.

If the market price of bikes rises from $50 to $60, then the company will want to produce a larger quantity of bikes. This is because the overall marginal revenue is now higher and will be maximized differently. Before profit was maximized at six bikes, now the profit will be maximized by producing more bikes, perhaps seven.

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