Sullivan’s is a retailer of upscale men’s clothing. Suits cost Sullivan’s $320. The current price of suits to customers is $350, which leads to annual sales of 300 suits. The elasticity of the demand...

Sullivan’s is a retailer of upscale men’s clothing. Suits cost Sullivan’s $320. The current price of suits to customers is $350, which leads to annual sales of 300 suits. The elasticity of the demand for men’s suits is estimated to be -2.5 and assumed to be constant over the relevant price range. Each purchase of a suit leads to an average of 2 shirts and 1.5 ties being sold. Each shirt contributes $25 to profit, and each tie contributes $15 to profit. Determine a profit-maximizing price for suits.

Objective To use a nonlinear model to price men’s suits optimally, taking into account the purchases of shirts and ties that typically accompany purchases of suits.