Joy's Frozen Yogurt shops have enjoyed rapid growth in northeastern states in recent years. From the analysis of joy's various outlets, it was found that die demand curve follows this pattern:
Q = 200 - 300P + 120I + 65T - 250A, + 400Aj
Where
Q = number of cups served per week
P = average price paid for each cup
I = per capita income in the given market (thousands)
T= average outdoor temperature
AC = competition's monthly advertising expenditures (thousands)
Aj-Joy's own monthly advertising expenditures (thousands)
One of the outlets has the following conditions: P = 1.50, I = 10, T = 60, AC = 15, A; = 10.
a. Estimate the number of cups served per week by this outlet. Also determine the outlet's demand curve.
b. What would be the effect of a $5,000 increase in the competitor's advertising expenditure? Illustrate the effect on the outlet's demand curve.
c. What would Joy's advertising expenditure have to be to counteract this effect?