What is effective price reduction resulting from promotion

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Assignment:

The Burger Shack recently decided to raise the price for their deluxe gourmet burger from $9 to $12 following increases in labor and materials costs. Unfortunately, sales dropped sharply from 16,200 to 9000 burgers per month. In response, The Burger Shack ran a half off coupon promotion. The total cost of the promotion was $500 added on to their typical advertising budget of $4000 per month. The promotion was judged a success as it proved highly popular with customers. In the period prior to expiration, coupons were used on one third of all purchases. Monthly sales rose to 15,000 burgers.

Calculate the arc price elasticity based upon The Burger Shack's price increase.
What is the effective price reduction resulting from the promotion?
Given the price reduction (you may assume that price elasticity remains constant),calculate Burger Schack's s arc advertising elasticity.
Is there any reason to doubt the accuracy of the calculation in part C?

Reference no: EM133203655

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