ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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**Problem 14-05 Algo (A Production Application: Par, Inc. Revisited)**

Jim's Camera shop sells two high-end cameras, the Sky Eagle and Horizon. The demand for these two cameras is as follows (\( D_S \) = demand for the Sky Eagle, \( P_S \) is the selling price of the Sky Eagle, \( D_H \) is the demand for the Horizon and \( P_H \) is the selling price of the Horizon):

\[
D_S = 225 - 0.6 P_S + 0.3 P_H 
\]

\[
D_H = 270 + 0.1 P_S - 0.58 P_H 
\]

The store wishes to determine the selling price that maximizes revenue for these two products. Select the revenue function for these two models. Choose the correct answer below.

(i) \( P_S D_S + P_H D_H = P_H (270 - 0.1 P_S - 0.58 P_H) + P_S (225 - 0.6 P_S + 0.3 P_H) \)

(ii) \( P_S D_S + P_H D_H = P_S (225 - 0.6 P_S + 0.3 P_H) + P_H (270 - 0.1 P_S - 0.58 P_H) \)

(iii) \( P_S D_S - P_H D_H = P_S (225 - 0.6 P_S + 0.3 P_H) + P_H (270 - 0.1 P_S - 0.58 P_H) \)

(iv) \( P_S D_S - P_H D_H = P_S (225 + 0.6 P_S + 0.3 P_H) - P_H (270 - 0.1 P_S - 0.58 P_H) \)

**Select your answer:**

*Drop-down selection box*

Find the prices that maximize revenue.

Do not round intermediate calculations. If required, round your answers to two decimal places.

**Optimal Solution:**

Selling price of the Sky Eagle (\( P_S \)): $____

Selling price of the Horizon (\( P_H \)): $____

Total Revenue: $____
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Transcribed Image Text:**Problem 14-05 Algo (A Production Application: Par, Inc. Revisited)** Jim's Camera shop sells two high-end cameras, the Sky Eagle and Horizon. The demand for these two cameras is as follows (\( D_S \) = demand for the Sky Eagle, \( P_S \) is the selling price of the Sky Eagle, \( D_H \) is the demand for the Horizon and \( P_H \) is the selling price of the Horizon): \[ D_S = 225 - 0.6 P_S + 0.3 P_H \] \[ D_H = 270 + 0.1 P_S - 0.58 P_H \] The store wishes to determine the selling price that maximizes revenue for these two products. Select the revenue function for these two models. Choose the correct answer below. (i) \( P_S D_S + P_H D_H = P_H (270 - 0.1 P_S - 0.58 P_H) + P_S (225 - 0.6 P_S + 0.3 P_H) \) (ii) \( P_S D_S + P_H D_H = P_S (225 - 0.6 P_S + 0.3 P_H) + P_H (270 - 0.1 P_S - 0.58 P_H) \) (iii) \( P_S D_S - P_H D_H = P_S (225 - 0.6 P_S + 0.3 P_H) + P_H (270 - 0.1 P_S - 0.58 P_H) \) (iv) \( P_S D_S - P_H D_H = P_S (225 + 0.6 P_S + 0.3 P_H) - P_H (270 - 0.1 P_S - 0.58 P_H) \) **Select your answer:** *Drop-down selection box* Find the prices that maximize revenue. Do not round intermediate calculations. If required, round your answers to two decimal places. **Optimal Solution:** Selling price of the Sky Eagle (\( P_S \)): $____ Selling price of the Horizon (\( P_H \)): $____ Total Revenue: $____
Expert Solution
Check Mark
Step 1: Define the problem

There are two types of cameras : Sky eagle (s)  & Horizon (H) 

Demand function of S : Ds = 225 - 0.6Ps + 0.3 Ph 

Demand function of H : Dh = 270 + 0.1Ps -  0.58 Ph

Where , 

Ph = Price of h , Ps = Price of S

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