The Camera Shop sells two popular models of digital SLR cameras. The sales of these products are not independent; if the price of one increases, the sales of the other increases. In economics, these two camera models are called substitutable products. The store wishes to establish a pricing policy to maximize revenue from these products. A study of price and sales data shows the following relationships between the quantity sold (N) and price (P) of each model. NA = 185 - 0.7PA + 0.55P, Ng = 282 + 0.08PA – 0.7P8 (a) Construct a model for the total revenue and implement it on a spreadsheet. What is the profit (in dollars) predicted by your model when the price of model A is PA = $230 and the price of model B is Pg = $320. $ 93318 (b) Develop a two-way data table to estimate the optimal prices for each product in order to maximize the total revenue. Vary each price from $250 to $500 in increments of $10. PA = 270 PB = 390

The Camera Shop sells two popular models of digital SLR cameras. The sales of these products are not independent; if the price of one increases, the sales of the other increases. In economics, these two camera models are called substitutable products. The store wishes to establish a pricing policy to maximize revenue from these products. A study of price and sales data shows the following relationships between the quantity sold (N) and price (P) of each model. NA = 185 - 0.7PA + 0.55P, Ng = 282 + 0.08PA – 0.7P8 (a) Construct a model for the total revenue and implement it on a spreadsheet. What is the profit (in dollars) predicted by your model when the price of model A is PA = $230 and the price of model B is Pg = $320. $ 93318 (b) Develop a two-way data table to estimate the optimal prices for each product in order to maximize the total revenue. Vary each price from $250 to $500 in increments of $10. PA = 270 PB = 390

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter12: More Realistic And Complex Pricing

Section: Chapter Questions

Problem 9MC: After running a promotional campaign, the owners of a local hardware store decided to decrease the...

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