Compute the price elasticity of demand for einstein''s

Compute the price elasticity of demand for einstein''s bagels

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Reference no: EM1374884

The demand purpose for Einstein Bagels has been estimated as follows-

Qx = -15.87 - 40.73Px + 84.17Py + 0.55Ax

Where Qx represents thousands of bagels, Px is the price per bagel, Py is the average price per bagel of other brands of bagels, and Ax represents thousands of dollars spent advertising Einstein Bagels.

a. Compute the price elasticity of demand for Einstein's Bagels as well as explain what it means.

b. Originate an expression for the (inverse) demand curve for Einstein's Bagels.

c. If the cost of producing Einstein's Bagels is constant at $0.10 per bagel, must they reduce price and thereafter sell more bagels (presume profit maximization is the company's goal)?

d. Must Einstein Bagels spend more on advertising?

Reference no: EM1374884

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