Microsoft® Excel Data Analysis and Business Modeling

Chapter 68. Estimating a Demand Curve

• What do I need to know to price a product?

• What is the meaning of elasticity of demand?

• Is there any easy way to estimate a demand curve?

• What does a demand curve tell us about a customer’s willingness to pay for our product?

Every business must determine a price for each of its products. Pricing a product properly is difficult. In Chapter 68-Chapter 71, I’ll describe some simple models that might aid you in pricing a product to maximize profitability. For further insights into pricing, refer to the excellent book Power Pricing, by Robert J. Dolan and Hermann Simon (Free Press, 1996).

What do I need to know to price a product?

Let’s consider a product such as a candy bar. In order to determine a profit-maximizing ...