Reference no: EM13735351
Qx=1.0-2.0Px+1.5I+0.8Py-3.0Pm+1.0A
Where Qx= sales of CFC cornflakes, in millions of 10-ounce boxex per year
Px= the price of CFC cornflakes, in dollars per 10-ounce box
I= personal disposable income, in trillions of dollars per year
Py= price of competitive brand of cornflakes, in dollars per 10-ounce box
Pm= price of milk, in dollars per quart
A= advertising expenditures of CFC cornflakes, in hundreds of thousands of dollars per year
This year, Px=$2, I=$4, Py=$2.50 , Pm=$1, A=$2
Questions
c) Estimate the level of sales next year if CFC reduces Px by 10 percent and increases advertising by 20 percent, Income rises by 5 percent, Py is reduced by 10 percent, and Pm remains unchanged.
(d) By how much should CFC change its advertising if it wants its sales to be 30 percent higher than this year?
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