The arc price elasticity implied by the initial response

Assignment Help Microeconomics
Reference no: EM13124355

Z-Best Pizza recently decided to raise its regular price on large pizzas from$9 to $12 following increases in costs of labor and materials.Unfortunately; sales dropped sharply from8, 100 to 4.500 pizzas per month. In an effort to regain lost sales-Best ran a coupon promotion featuring $5 off the new regular price. Coupon printing and distribution costs totaled $100, andcaused only a modest increase in the typical advertising budget of $ 2,400 per month. The promotion was judged a success as it proved highly popular with consumers. In the period prior to expiration, coupons were used on 40% of all purchases and monthly sales rose to 7,500 pizzas.

A.) Calculate the arc price elasticity implied by the initial response to Z-Best's price increase.

B.) Calculate the effective price reduction resulting from the coupon promotion.

C.) In light of this price reduction, and assuming no change in the prices elasticity of demand, calculate Z-Best's arc advertising elasticity.

D.) Why might the true arc advertising elasticity differ from that calculated in Part C?

Reference no: EM13124355

Questions Cloud

Amount of the finance charge : The customer fails to pay the bill within 30 days and a finance charge is added to the customer's account. What is the amount of the finance charge?
Simultaneous linear equations in two variables : A landscaper wants to combine golden landscape rock with rust-colored landscape rock to make a mix. The golden rock costs $0.59 per pound and the rust-colored rock cost $0.49 per pound.
Calculate the optimal price for papa burgers : Calculated the point price elasticity of demand for Papa burgers and calculate the optimal price for Papa burgers if marginal cost is $1 per unit.
Essential meaning of the grammatical structure : Devise concept questions to check student understanding of the sentences. Write 3 or 4 questions to each sentence. Make sure all your questions are useful, i.e. they check the essential meaning of the grammatical structure.
The arc price elasticity implied by the initial response : Calculate the arc price elasticity implied by the initial response to Z-Best's price increase and calculate the effective price reduction resulting from the coupon promotion.
Exploration of "race and ethnicity in the melting pot : The essay question is here: Write an essay in which you discuss a central theme to our exploration of "Race and Ethnicity in the Melting Pot". Use works by two of the following writers to support your ideas, as well as deepen your discussion: Baldwin..
Linear equations in business : Why is it important to understand linear equations in business? In particular can you provide examples where the relationship between items that can be affected by management and 'items' that management wished to achieve or attain may be 'linear'?
Calculate the quantity demanded at prices : Calculate the quantity demanded at prices of $5, $4, and $3 and calculate the prices necessary to sell 1,250, 1,500 and 1,750 thousand s of five gallon containers.
Excel solver-maximize annual passenger-carrying capability : Excel Solver-maximize annual passenger-carrying capability, An airline owns an aging fleet of jet airplanes. It is considering a major purchase of up to 17 new model 7a7 and 7b7 jets. The decision must take into account numerous cost and capabilit..

Reviews

Write a Review

Microeconomics Questions & Answers

  How much profit will each firm earn

Set up the game and find the equilibrium assuming that Apple and Yahoo move simultaneously, If the firms are Cournot duopolists, how much profit with each firm earn and what will the market price be and how much profit will each firm earn?

  Depict an isoquant map

Depict an isoquant map depicting a typical firm's use of two inputs - white and black labor. Label its slope. What would be the effect of an increase the price of black labor from $12 to $13 and a decrease in the price of white labor from $13 to $12..

  Discuss possible profit-maximizing business strategies

Use the Porter's five forces framework to explain this pattern. Discuss possible profit-maximizing business strategies that artists, record companies, and retailers may wish to pursue.

  Interest parity concept using formal methods

Discuss and explain the interest parity idea using formal methods Describe IS and LM curve behavior and nominal interest rate in the domestic economy,

  Analysis of production and costs

Will firms in industries, in which high levels of output are necessary for minimum efficient scale, tend to have substantial degrees of operating leverage? Please explain.

  What interest rate would this be a fair deal

Curly's Life Insurance Co. is trying to sell you an investment policy that will pay you and your heirs $33,000 per year forever.

  Estimate industry equilibrium price or output combination

Demand and supply situations in perfectly competitive market for unskilled labor are as follows, Estimate the industry equilibrium price or output combination both graphically and algebraically.

  Relationship between ap and mp

Explain the relationship between AP and MP. Be sure to use graphs to help support your answer. Calculate the MP and the AP for each worker

  How the egg breaking rampage affects egg prices

Would you consider the demand for eggs to be elastic or inelastic and illustrate and explain with a diagram how can the Government intervene and correct this situation

  Oligopolistic market and monopolist market

What are the advantages and disadvantages of the oligopolistic structure? How would an increase in a monopolist's fixed costs affect its profit-maximizing choice of price and quantity?

  Explain the median housing price in a community

Explain the median housing price in a community

  Describe degree of operating leverage

Southcoast Oil's fixed costs are $2,500,000 and its debt repayment requirements are $1,000,000. Selling price per barrel of oil is $18 and variable costs per barrel are $10.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd