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?