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 + .8A + 55Pop + 800P° where Q is the number of tacos sold per store per week, A is the level of local advertising expenditure (in pesos), Pop denotes the local population (in thousands), and P0 is the average taco price of local competitors. For the typical McPablo’s outlet: P = Php1.50, A = Php1,000, Pop = 40, and P0 = Php1.00. Estimate the weekly sales for the typical McPablo’s outlet.What is the current price elasticity for tacos? What is the advertising elasticity?Should McPablo’s raise its taco prices? Why or why not?

Weekly demand for "old-fashioned" tacos in 53 regional markets is given below: Q = 400 -1,200P + .8A…

Answered: Management of McPablo’s Food Shops has…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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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 + .8A + 55Pop + 800P°

where Q is the number of tacos sold per store per week, A is the level of local advertising expenditure (in pesos), Pop denotes the local population (in thousands), and P⁰ is the average taco price of local competitors. For the typical McPablo’s outlet: P = Php1.50, A = Php1,000, Pop = 40, and P⁰ = Php1.00.

Estimate the weekly sales for the typical McPablo’s outlet.
What is the current price elasticity for tacos? What is the advertising elasticity?
Should McPablo’s raise its taco prices? Why or why not?

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