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
Chapter5: Income And Substitution Effects
Section: Chapter Questions
Problem 5.11P
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Transcribed Image Text: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 - 0.7PB
(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 Pa = $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
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