Question
Can you please help me with this exercise? The marketing department of The Great Bombay Tea Company has estimated the weekly demand for its brand
Can you please help me with this exercise?
The marketing department of The Great Bombay Tea Company has estimated
the weekly demand for its brand of gourmet pizza as
Q = 500 100P + 50I + 20Py + 30A
where Q is the number of pizzas (000's), P is the market-determined price of
Bombay's pizza, I is weekly per capita income, Py is the price of the brand of
pizza sold by Universal Foods, Inc., and A is Bombay's weekly advertising
expenditures ($000's). The supply equation for Bombay's gourmet pizza is
Q = 1,800 + 450P
a. What is the relationship between Bombay's pizza and Universal's pizza?
b. Suppose that I = $200, Py = $20 and A = $100. What is the equilibrium
price and quantity of Bombay pizza?
c. Suppose that Bombay's chief economist predicts that the current economic
expansion will increase weekly per capita income to $255. What effect will
this have on the equilibrium price and quantity?
d. Based on your answer to part c, how would you characterize Bombay's
pizza?
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