Problem:
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 quanity sold (N) and prices (P) of each model:
N (A) = 20 - o.62P (A) + 0.30P (B)
N (B) = 29 + 0.10P (A) - 0.60P (B)
*the letters in ( ) should be lower level letters
Question1. Construct a model for the total revenue and implement it on a spreadsheet.
Question2. What s the predicted revenue if P(A) = $20 and P(B) = $35? What if the prices are P(A) = $25 and P(B)=$50? Please provide step by step solution and show all work.