16. Revenue with Substitutable Products. The Camera Shop sells two popular models of digital single lens reflex (DSLR) cameras. The sales of these products are not inde- pendent; 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 estab- lish 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 195 0.6PA + 0.25PB N = 301+0.08PA-0.5PB 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 incre- ments of $10.

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
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Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
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Chapter3: Demand Analysis
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16. Revenue with Substitutable Products. The Camera Shop sells two popular models
of digital single lens reflex (DSLR) cameras. The sales of these products are not inde-
pendent; 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 estab-
lish 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 195 0.6PA + 0.25PB
N = 301+0.08PA-0.5PB
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 incre-
ments of $10.
Transcribed Image Text:16. Revenue with Substitutable Products. The Camera Shop sells two popular models of digital single lens reflex (DSLR) cameras. The sales of these products are not inde- pendent; 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 estab- lish 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 195 0.6PA + 0.25PB N = 301+0.08PA-0.5PB 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 incre- ments of $10.
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