1. Management of McPablo's Food Shops has completed a study of weekly demand for its "old-fashioned" tacos in 53 regional markets. The study revealed that
Q = 400 - 1,200P + 0.8A + 55Pop 800P
where Q is the number of tacos sold per store per week, A is the level of local advertising expenditures (m dollars), Pop denotes the local population (m thousands), and PG is the avenge taco price of local competitors. For the typical McPablo's oudet, P = $1.50, A = $1,000, Pop = 40, and = $1. •
a. Estimate the weekly sales for the typical McPablo's outlet
b. What is theniffent price elasticity for tacos? What is the advertising easnaty.
c. Should McPablo's raise its taco pdce? Why or why not?
2. Your &ma's research department has estimated the income elasticity of demand for Art Deco lawn furniture to be -0.85. You have just learned that due to an upturn in the economy, consumer incomes are expected to rise by 5 percent next year. How will this event affect your ordering decision for PVC pipe, which is the main component in your furniture?
3. Which of the following goods would you expect to have the most inelastic demand? Why?
a. Swiss cheese
b. Cheese
c. Dairy products
4. In an article about the manna! problems of USA Today, Newsweek reported that the paper was losing about $20 million a year. A Wall Street analyst said hat the paper should raise its price from 50 cents to 75 cents, which he stimated would bring in an additional $65 million
a year. The paper's publisher :jetted the idea, saying that drculation could drop sharply after a price crease, citing The Wall Streetjostrnals experience after it increase its price to 75.
Attachment:- ECO.rar