Chapter 7, Problem 47P

Another way to derive a demand function is to break the market into segments and identify a low price, a medium price, and a high price. For each of these prices and market segments, we ask company experts to estimate product demand. Then we use Excel’s trend curve fitting capabilities to fit a quadratic function that represents that segment’s demand function. Finally, we add the segment demand curves to derive an aggregate demand curve. Try this procedure for pricing a candy bar. Assume the candy bar costs $0.55 to produce. The company plans to charge between $1.10 and $1.50 for this candy bar. Its marketing department estimates the demands shown in the file P07_47.xlsx (in thousands) in the three regions of the country where the candy bar will be sold. What is the profit-maximizing price, assuming that the same price will be charged in all three regions?