Of course, a firm's demand curve is constantly changing and often depends on factors beyond the firm's control (such as the state of the economy and a competitor's price). In short, if you charge a price of $ p per unit, the demand curve gives you a number D(p), which equals the number of units of your product that will be demanded at price $ p.

Simply put, a demand curve tells you the number of units of your product a customer will demand at each price.

The variable cost to produce each unit of the product.

These estimations are used to determine a profit-maximizing price, and to do so you need to know two things: In this section you learn how to fit the two most frequently used demand curves (linear and power) to a particular marketing situation.

Using the SolverTable add-in to quickly price thousands of products!Įstimating Linear and Power Demand Curves.

Examining the effect of product tie-ins on the optimal product price.

Using the Excel Solver to determine the profit maximizing price.

Using the Excel Trend Curve and Goal Seek to obtain back-of-the-envelope estimation of a demand curve.

(That is, managers need to understand the demand curve.) To do so effectively, this chapter covers the following topics: To do so, managers need to understand how consumers' willingness to purchase changes at different price levels and how these changes impact profitability. Understanding how pricing impacts revenues and profitability is one of the most important issues faced by managers. Estimating Demand Curves and Using Solver to Optimize Price PricingĬhapter 4: Estimating Demand Curves and Using Solver to Optimize PriceĬhapter 8: Revenue Management Chapter 4. Marketing Analytics: Data-Driven Techniques with Microsoft Excel (2014) Part II.

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