Amalgamated Popcorn, Inc. is a fairly small firm selling bags of flavored gourmet popcorn in apopular mall. As shop owner and operator, you have observed that your daily sales tend to follow apattern that can be stated as:

Q_P= 500 - 100P_P+ 1.25A - 20P_S + 2I

where Q_P = unit sales of popcorn bags, P_P= price of bags in dollars, A = advertising

expenses, P_S =price of soda pop sold at your stand in dollars, I = per capita income of customers in thousands ofdollars.

You are currently charging $1 per bag of popcorn, spending $200 in advertising, charging $1 for asoda pop, and per capita income is $22,000.

a. Compute the elasticity coefficients for price, income, and cross-price. (15 pts)

b. You are currently paying $.45 for popcorn (including cost for the corn, cost to pop, and bag) andcurrently charging $1 per bag of popcorn. Is this the profit-maximizing price? Explain.