McPablo's Food Shops' management has completed a study of weekly demand for its old-fashioned tacos in 53
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Question:
- McPablo's Food Shops' management has completed a study of weekly demand for its "old-fashioned" tacos in 53 regional markets. The study discovered
Q = 400 - 1,200P + 0.8A + 55Pop + 800Po
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 Po is the average taco price of local competitors. For the typical McPablo's outlet, P = $1.50, A = $1,000, Pop = 40, and Po = $1.
- 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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