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Pricing Strategy Implementation for Optimal Profit Maximization

Learn the step-by-step process of implementing a pricing strategy for maximizing profits. From running regressions for cost and output to determining optimal pricing and quantity, this guide provides insights for effective pricing policies.

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Pricing Strategy Implementation for Optimal Profit Maximization

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  1. Pricing and Strategyassignment 1 Christian Cruz Ruth Lawanson John Masline

  2. Pricing policy step 1 • Run a Regression for Cost and Output… • …Total Cost Equation: TC = 15030 + 9.94Q Note: MC = 9.94

  3. Pricing policy step 2 • Run a Regression for Price and Demand… • …Demand Equation: P = 29.22446 - .0035Q Note: MR = Derivative of Price with respect to Quantity = 29.22446-.006935Q

  4. Pricing policy step 3 • Use both equations to solve for MR = MC • This gives us the optimal QUANTITY to produce and thus, the optimal PRICE to sell. 9.94 = 29.22446 - .006935Q Q = 2780 P = 29.22446 - .00693*2780 = 19.5836

  5. Assuming a 10% increase in demand

  6. Accounting for “optimism”

  7. Any questions? THANK YOU.

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