Question
The Camera Shop sells two popular models of digital single lens reflex (DSLR) cameras (Camera A Price: $200, Camera B Price: $300). The sales of
The Camera Shop sells two popular models of digital single lens reflex (DSLR) cameras (Camera A Price: $200, Camera B Price: $300). 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:
NCameraA = 195 - 0.6PCameraA + 0.25PCameraB
NCameraB = 301 + 0.08PCameraA - 0.5PCameraB
a) 10 points. Use MS Excel drawing tools to build an influence diagram that models the factors that influence total revenue for The Camera Shop. b) 10 points. Construct a model for the total revenue and implement it on a spreadsheet. c) 10 points. Develop a two-way data table to estimate the optimal prices for each product to maximize the total revenue. Vary each price from $250 to $500 in increments of $10. Clearly Identify the combination of prices that maximizes profit for The Camera Shop.
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