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Question: The Radio Shop sells two popular models of portable sport radios, model A and model B. The sales of these products are not independent of each other (in economics, we call these substitutable products, because if the price of one increases, sales of the other will increase). 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:
NA = 20 - 0.62PA + 0.30PB NA = 29 + 0.10PA - 0.60PB
a. Construct a model for the total revenue and implement it on a spreadsheet.
b. What is the predicted revenue if PA = +18 and PB = +30? What if the prices are PA = +25 and PB = +50?
(a) If Big Red has a transportation budget of $8,240 and is willing to spend all of it, how many books should Big Red ship from each warehouse to each store in order to fill all the orders? (b) Is there a way of doing this for less money?
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