# Pricing and Substitution

In my previous post on pricing, I showed a way to dramatically reduce the analysis required for a pricing decision. In this post, we will take it a step further and show that, in a significantly more complex example, we can still simplify the decision-making process. As an added bonus (!), we can generalize our result to something that makes intuitive sense and can be applied to quickly generate scenario analyses where needed.

Recall our example where we manufacture cars. We have a high-end offering priced at $40,000. The margin we earn on each sale is $4,000. Now we are considering…