Question

Solve in Excel using the Solver Feature and provided detailed steps that are easy to follow throughout the process.

A prescription drug is produced in the United States and sold internationally. Each unit of the drug costs $60 to produce. In the German market, you sell the drug for 150 euros per unit. The current exchange rate is 0.667 U.S. dollars per euro. Current demand for the drug is 100 units, and the estimated elasticity is 2.5. Assuming a linear demand curve, determine the appropriate sales price (in euros) for the drug.

Answer 1

To determine the optimal sales price in euros for the drug, use Excel Solver to optimize the revenue minus COGS with the constraints of the cost of production and assuming a linear demand curve.

Step-by-step explanation:

Using Excel Solver to Determine Optimal Sales Price

To determine the appropriate sales price in euros for a prescription drug in the German market with an estimated elasticity of 2.5, the Excel Solver feature can be used. The steps you would follow are as follows:

Click Solve to find the optimal sales price.

Keep in mind that this setup assumes a linear demand curve and does not factor in elasticity directly. More sophisticated models can include elasticity in the optimization.