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
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 _______________________?
| 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
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