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Thread: Working out a formula from a set of data

  1. #1
    Jun 2010

    Working out a formula from a set of data

    Hi all.

    I would like to know what sort of formula my competitiors (if any) are using to price up their products. Some data I have gathered is below.

    my cost ex VAT Competitors Retail price
    2.56 13.5
    7.88 21.5
    14.48 29.98
    15.93 34.17
    18.33 39.16
    20.81 45.95
    25.25 52.17

    What I would like to know is how do I workout the formula that best suits the relationship between cost of product and final retail price.
    Or could someone tell me what maths subject this comes under so I can do some reading up and learn myself.

    Any help would be greatyly appreciated and a big help.


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  2. #2
    Super Member Bacterius's Avatar
    Nov 2009
    Hello Dave,
    perhaps it wasn't necessary to actually mention who was your competitor

    Anyway, a good start would be to plot the data and see how it looks. For instance, if it looks like a straight line, then you have a linear relationship. If it looks like a parabola, you have a square relationship. If it looks like a very quick and steep parabola, it might be an exponential relationship. Once you have decided what the relationship is, you can deduce what the coefficient (or "gradient") is and come up with a formula that links your cost price to the retail price.

    Of course, it is highly probable that a relationship actually exists, but depending on how accurate your data is, you might not be able to strictly select one right away, in which case you will need some more data before repeating the attempt.

    If I can suggest some keywords, you could look up data analysis and graph reading. And linearization, too.
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