The Links Company sells its golf clubs at golf outlet stores throughout the United States. The company knows that demand for its clubs varies considerably with price. In fact, the price has varied...

The Links Company sells its golf clubs at golf outlet stores throughout the United States. The company knows that demand for its clubs varies considerably with price. In fact, the price has varied over the past 12 months, and the demand at each price level has been observed. The data are in the data sheet of the file Golf Club Demand.xlsx (see Figure 2.23.) For example, during the past month, when the price was $390, 6800 sets of clubs were sold. (The demands in column C are in hundreds of units. The cell comment in cell C3 reminds you of this.) The company wants to estimate the relationship between demand and price and then use this estimated relationship to answer the following questions:

1. Assuming the unit cost of producing a set of clubs is $250 and the price must be a multiple of $10, what price should Links charge to maximize its profit?

2. How does the optimal price depend on the unit cost of producing a set of clubs?

3. Is the model an accurate representation of reality?

Business Objectives To estimate the relationship between demand and price, and to use this relationship to find the optimal price to charge.

Excel Objectives To illustrate Excel’s trendline tool, and to illustrate conditional formatting.