Question: To make some extra cash during the pandemic, Mark started selling musical equipment online. To do so , he typically ( i ) purchases premium
To make some extra cash during the pandemic, Mark started selling musical equipment online.
To do so he typically i purchases premium bare bones musical equipment from various
small manufacturers, ii finetunes and customizes them, and iii sells for a premium. He
operates his online store in a maketoorder fashion, ie he first takes new orders and then
proceeds to buy and customize the necessary equipment.
Mark always tries to keep the price he pays for the barebones systems as low as possible.
Through skillful negotiations, he managed to convince local shops to sell him systems for around
$per system on average. However, there is a finite supply of such systems available in
that price range Mark figures around
All of Marks customers come from two distinct geographical regions: the East Coast E and the
West Coast W Due to historical bias, every month, Mark first takes orders from the E and then
from the W and proceeds to fill them accordingly. For instance, if he had orders from the E
and from the W he would fill the from the E first and then only an additional from the
W due to the limited capacity.
To keep things simple, Mark typically charges the same price irrespective of the market where
the order comes from currently, $ per order. He is aware that customers typically do not
like paying for shipping. As such, he is not charging them any shipping fees beyond the base
price for the system. Based on his limited experience, he estimates that the monthly demand is:
For the East Coast, expected demand is given by max price,
For the West Coast, expected demand is given by max price,
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