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

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:

   NA = 198 - 0.5PA + 0.25PB

   NB = 305 + 0.07PA - 0.6PB

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 $ ___________

Explanation / Answer

Total revenue = NA*PA + NB*PB

Maximum Revenue = $ 81398

Max profit occurs at Camera A price of $ _310__________

Max profit occurs at Camera B price of $ ____340_______

Maximum revenue

Max profit occurs at Camera A price of $ _310__________

Max profit occurs at Camera B price of $ ____340_______

PA PB NA NB Total Revenue 250 250 135.5 172.5 77000 260 260 133 167.2 78052 270 270 130.5 161.9 78948 280 280 128 156.6 79688 290 290 125.5 151.3 80272 300 300 123 146 80700 310 310 120.5 140.7 80972 320 320 118 135.4 81088 330 330 115.5 130.1 81048 340 340 113 124.8 80852 350 350 110.5 119.5 80500 360 360 108 114.2 79992 370 370 105.5 108.9 79328 380 380 103 103.6 78508 390 390 100.5 98.3 77532 400 400 98 93 76400 410 410 95.5 87.7 75112 420 420 93 82.4 73668 430 430 90.5 77.1 72068 440 440 88 71.8 70312 450 450 85.5 66.5 68400 460 460 83 61.2 66332 470 470 80.5 55.9 64108 480 480 78 50.6 61728 490 490 75.5 45.3 59192 500 500 73 40 56500 310 340 128 122.7 81398 300 330 130.5 128 81390

Maximum revenue

81398

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