Essentials of Business Analytics 1st Edition by Jeffrey Camm,James Cochran,Michael Fry,Jeffrey Ohlmann ,David Anderson

Exercise 19

The Camera Shop sells two popular models of digital 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:
N A 5 195 2 0.6 P A 1 0.25 P B
N B 5 301 1 0.08 P A 2 0.5 P B
a. Construct a model for the total revenue and implement it on a spreadsheet.
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.