Continuing Problem 3 in a slightly different direction, create a two-way SolverTable where the inputs are the elasticity and the production capacity, and the outputs are the optimal price and the...

Continuing Problem 3 in a slightly different direction, create a two-way SolverTable where the inputs are the elasticity and the production capacity, and the outputs are the optimal price and the optimal profit. (This actually creates two tables, one for each output.) Discuss your findings.

Problem 3

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?

Example 7.1