Now let's try to define an objective or a goal.

And the first thing we would like to do is we would like to say

how can we sell the most quantity of the product?

How can we maximize the quantity of the product being sold, right?

In this case, the goal or the objective is just to maximize quantity.

The quantity we wanna make it as large as possible.

And the action we can take is just a simple action.

We can just change the price.

We can change the price of the product, increase it or decrease it.

And by changing the price, we either encourage or

discourage consumers whether to buy or not to buy the product.

Finally, we need a model.

Now models can be very, very complex, but in this case we already have the model,

and the model is basically the graph I showed you two slides ago, and

you can also see on the bottom right corner.

And the model basically tells us, if we change the price,

let's say if we increase the price, by how much did the quantity go down?

For example we look at this graph, we can see that

setting a price of 1 sold the maximum quantity of the product.

And the question is, can we change the price even more to do better?

Can we use some sort of prediction or

recommendation to give to the company to say, can we increase the quantity sold?

And the answer is actually, yes.

We may not be able to give money to people to buy the product.

We can't actually spend money to get them to buy the product.

We can probably give them the product for free.

We can actually set the price to be 0.

In this case we're taking the regression we've seen before, or

kind of extending the line to the left hand side.

And then we can see using the regression equation, that if we plug in x=0,

which means the price equals 0, we'll get the volume of y of 10.13,

which is the maximum quantity we can sell.

So, in this example, what I tried to show you is we can change the price to

increase or decrease the quantity sold.

Our goal was to maximise the quantity we sell, and the model was just the graph and

the regression equation that Professor Iyengar had shown you.

And I've shown you how finding a lower price increases the quantity.