Price and Demand

A simple yet useful example of revenue  -  price elasticity.  With a full Python code example   We used to run these models in SAS in big CPG for every product we sold, advertised or proposed.  Despite all the fancy things being done these days, this is still a useful to do.   Also a good simple Python example.

Optimizing price, maximizing revenue

Posted by Mab Alam in DSC

Problem statement

Price and quantity sold are the two determinants of business revenue/profit. At higher price the revenue is expected to be high. But this is not the case all the time. We know from our everyday experience, as price of something goes up, people have less tendency to buy it.

The reverse is also true, that is, as price is down, sales goes up (think what happens in a block buster sales event in a nearby shopping mall). But sales going up doesn’t always mean that the revenue will also go up, because of the trade-off created by price drop.

Setting a right price of products/services is one of the most important decisions a business can make. Under-pricing and over-pricing both can hurt a company’s bottom line. So where is the sweet spot, the right price, that maximizes revenue and profit?

With a simple example let’s examine how to optimization price to maximize revenue/profit. ... "