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An Electronics Store Sells Two Models of Television

question 37

Essay

An electronics store sells two models of television. The sales of these two models, X and Y, are dependent, that is, if the price of one increases, the demand for the other increases. A study is made to find the relationship between the demand (D) and the price (P) in order to maximize the revenue from these products. The result of the study is shown below.
DX = 476 - 0.54 PX + 0.22 PY
DY = 601 + 0.12 PX - 0.54 PY
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 of each of the two products in order to maximize the total revenue. Vary price of each product from $600 to $900 in increments of $50.


Definitions:

Price Level

A measure of the average prices of goods and services in the economy at a given time, often compared to a base year to assess inflation or deflation.

Aggregate Demand Curve

The total demand for all goods and services in an economy at different price levels, typically downward sloping, indicating an inverse relationship between price level and demand.

Price Level

The mean of current prices for all goods and services created within the economy.

Rate of Inflation

The percentage increase in the general level of prices for goods and services in an economy over a given period.

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