Question

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 $___________________

The answer to A is _______________________?

The answer to B is _______________________?

The answer to C is _______________________?

Answer 1

PB	Revenue
250	75500
260	76620
270	77640
280	78560
290	79380
300	80100
310	80720
320	81240
330	81660
340	81980
350	82200
360	82320
370	82340
380	82260
390	82080
400	81800
410	81420
420	80940
430	80360
440	79680
450	78900
460	78020
470	77040
480	75960
490	74780
500	73500

a)

PA = 200

PB = 300

NA+ NB =

80100

b)

Max revenue occurs at PB = 370

c)

max revenue = 82340