Reference no: EM13903489
Tawil Plant Foods, Inc. estimated the demand elasticities for the organic yoghurt, a product that they distribute nationally. They found that the price elasticity of demand (EP) is -4, the income elasticity of demand (EI) is 2, the cross-price elasticity of demand (EYK) with respect to the price of the King yoghurt is 1.5, the cross-price elasticity of demand with respect to the price of PrimoPlants Mix nuts (ESM) is -2, and the demand elasticity with respect to advertising expenditures (EA) is 5.
The current price of Tawil's yoghurt is $29.95, per capita income is $11,000, the price of King's yoghurt is $39.99, the price of Mix nuts is $8.45, and advertising expenditures are $84,000 per month.
If Tawil increases its price of yoghurt by 10%, per capita income rises by 5%, the price of King's yoghurt increases by 4%, and the price of Mix nuts falls by 2%, by how much will advertising expenditures have to change in order to keep the sales of Tawil's yoghurt from changing?
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