You work for an appliance retailer and are charged with recommending pricing for a new
brand of dishwasher. You have collected data on prices and unit sales of a similar brand.
Using the data, estimate the following relationship:
Unit Sales = b0 + b1 (Price) + u
b0^
b1^
According to the model, if you charge $1,200 per unit, how many units can you expect to sell in a month?
Suppose each unit you sell costs you $800. According to your model, what price would you have to charge
to maximize your expected monthly profit? Call this the "profit maximizing price."
If you charged the profit maximizing price, how many units could you expect to sell each month?
-
If you charge the profit maximizing price, how much profit could you expect to earn each month?
Observation Price per Unit Unit Sales (per month)
1 $978 621
2 $1,200 389
3 $1,009 694
4 $945 557
5 $947 590
6 $952 752
7 $895 508
8 $1,206 420
9 $1,189 624
10 $1,060 426
11 $891 543
12 $947 657
13 $1,037 529
14 $1,076 377
15 $1,275 458
16 $964 560
17 $1,054 570
18 $914 677
19 $1,237 420
20 $964 595
21 $1,085 468
22 $844 547
23 $1,244 359
24 $1,099 315
25 $1,018 675
26 $1,042 431
27 $792 487
28 $814 513
29 $1,163 453
30 $1,101 726
31 $716 511
32 $1,126 448
33 $1,071 277
34 $948 610
35 $1,007 406
36 $990 561
37 $567 791
38 $569 761
39 $1,257 290
40 $1,433 267
41 $1,077 322
42 $1,021 420
43 $877 450
44 $736 745
45 $975 431
46 $977 535
47 $564 695
48 $1,141 403
49 $873 596
50 $1,061 446
51 $1,234 654
52 $962 480
53 $1,270 353
54 $1,193 657
55 $1,010 471
56 $1,099 360
57 $977 652
58 $928 515
59 $879 631
60 $1,042 470
61 $923 470
62 $941 621
63 $696 749
64 $1,311 385
65 $831 486
66 $795 579
67 $950 570
68 $1,269 206
69 $1,389 98
70 $1,265 350