A B C D E F G H I

1 Madison pricing problem in a UK market

2
3 Unit cost ($) 50
4 Exchange rate ($/£) 1.22
5 Given the
Given the assumptions
assumptions in in the
theproblem,
problem, the the company
company cancan use
use
6 Equivalent unit cost in pounds 40.984 Solver independently
Solver independently for for each
each country
countryto tofind
findthe
the optimal
optimal
price to
price tocharge
charge in
in that
thatcountry.
country. The
The reason
reason isisthat
that the
the price
price
7 setfor
set forany
any country
country simply
simply determines
determinesthe thedemand
demand (and(and
8 Parameters of demand function in UK market hence profit)
hence profit) for
for the
the the
the product
product inin that
that country;
country; demands
demands
forother
for other countries
countries are
are unaffected.
unaffected. However,
However, ifif there
there were
were aa
9 Constant Elasticity capacity constraint
capacity constraint onon how
how much
much the
the company
company could
couldsupply
supply
10 27556760 -2.4 toall
to all countries
countries total,
total, then
then thethe price
price decisions
decisions would
would not
not be
be
11 independent.
independent.
12 Pricing model (finding the right price in £ to maximize profit in $)
13 Price (£) 70.26
14 Demand (in UK) 1018.98
15 Profit ($) 36392.01
16