Continuing the previous problem, create a two-way data table similar to the one-way data table in Figure?7.11. This time, however, allow price to vary down a column and allow the capacity to vary across a row. Each cell of the data table should capture the corresponding profit. Explain how the values in the data table confirm the findings from SolverTable in the previous problem.

Figure 7.11:

Data from Previous Problem:

In the pricing model in Example 7.1 with the constant elasticity demand function, the assumption is that all units demanded are sold. Suppose the company has the capacity to produce only 200 units. If demand is less than capacity, all of demand is sold. If demand is greater than or equal to capacity, only 200 units are sold. Use Solver to find the optimal price and the corresponding profit. Then use SolverTable to see how sensitive these answers are to the production capacity, letting it vary from 170 to 230 in increments of 10. Discuss your findings relative to the original solution in Example 7.1. In other words, what is the effect of capacity on the optimal price and profit?

Determining Parameters of Demand Functions A F G H K M P 1 Madison pricing model - Ending demand funczons 2 3 Two points on the demand curve (as esamated by Madison) Price Demand $70 $80 5 400 300 7 Linear demand curve Constant elascity demand curve 450 450 10 400 400 11 350 350 12 300 300 13 250 250 14 y--10x + 1100 y= 4E+06x2.154 200 200 15 150 150 16 100 100 17 18 50 50 19 20 $68 $70 $72 $74 $76 $78 $80 $82 $68 $70 $72 $74 $76 $78 $80 $82 21 Price Price 22 Demand ---- --- -- Demand