Consider a retailer selling designer bags. Based on past experience, management estimates the relationship between demand, D, and price, P, by the linear function D = 2,400 - 0.6P.

a. At what price is revenue maximized and what is this maximum revenue ?

b. If theretailer charges the price you computed in part (a) above, how much money does the retailer leave on the table?

c. What would be the total revenue if the retailer can introduce three pricing classes: 2,000, 2,400 and 2,700?

1. Briefly describe a situation in which a retailer can charge three different prices for the same product.