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 A 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 = 190 - 0.7P_A + 0.35P_B N_B = 300 + 0.07P_A - 0.6P_B Construct a model for the total revenue and implement it on a spreadsheet. Develop 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= Price of Camera A(PA)*Quntity sold(NA) + Price of Camera B(PB)*Quntity sold(NB)

                   = PA*NA + PB*NB

                   = PA*(190-0.7*PA+0.35*PB) + PB*(300+0.07*PA-0.6*PB)

This formula is implemented in the following spreadsheet.

https://docs.google.com/spreadsheets/d/16Yv463ANMtCNJx-_td_8RhSxCKV9R2kYPgJ_gYutmLg/edit?usp=sharing

or

https://goo.gl/6hwkLf

Maximum total revenue found to be $72090 at Camera A price $250 and Camera B price $340.

• Max profit occurs at Camera A price of $ 250.
• Max profit occurs at Camera B price of $ 340.

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