Question

In: Statistics and Probability

The Camera Shop sells two popular models of digital SLR cameras (Camera A Price: 200, Camera...

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:

   NA = 195 - 0.6PA + 0.25PB

   NB = 301 + 0.08PA - 0.5PB

Construct a model for the total revenue and implement it on a spreadsheet. 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.

Max profit occurs at Camera A price of $ .

Max profit occurs at Camera B price of $ .

Solutions

Expert Solution

put this formula: =$D3*(195-0.6*$D3+0.25*E$2)+E$2*(301+0.08*$D3-0.5*E$2) while changing values of A and B in D column and 2nd row, we get maximum value 84999 at 270,390 point

Max profit occurs at Camera A price of $ =270

Max profit occurs at Camera B price of $ =330

below is excel output for corresponding A and B values represented in row and columns:


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