Problem 10-16 (Some Useful Excel Functions for Modeling) The Camera Shop sells two popular models of...

Problem 10-16 (Some Useful Excel Functions for Modeling)

The Camera Shop sells two popular models of digital SLR cameras (Camera A Price: 200, Camera B Price: 300). The sales of these products are not independent of each other, but rather if the price of one increase, the sales of the other will increase. 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 prices (P) of each model:

N_A = 195 - 0.6P_A + 0.25P_B

N_B = 301 + 0.08P_A - 0.5P_B

A. Construct a model for the total revenue and implement it on a spreadsheet. What is the total revenue from selling the two products based on the current prices?
$ ___________________________

Assume that product A price is kept at $200. Develop a data table to estimate the optimal price for product B in order to maximize the total revenue. Vary the price of product B from $250 to $500 in increments of $10.

B. Max revenue occurs at Camera B price of $ . $___________________________________________

C. The maximum revenue obtained with the above price of Camera B would be $ . $________________________

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