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 dollars), Pop denotes the local population (in thousands), and P° is the average taco price of local competitors. For the typical McPablo’s outlet, P = $1.50, A = $1,000, Pop = 40, and P° = $1.
a. Estimate the weekly sales for the typical McPablo’s outlet.
b. What is the current price elasticity for tacos? What is the advertising elasticity?
c. Should McPablo’s raise its taco prices? Why or why not?