Since your very successful release of Coyote Cranberry Cooler, Coyote Cola has done so well, the owner has decided it is time to bottle the beverage and sell it in regional gas stations and grocery stores.  Another, more in-depth, marketing study reveals the following weekly demand function for bottled CCC:

Q_D = 2676 – 40,000P_O + .6S + 300Pop – 2,400P_S + 4,300 P_C

Where P_O is the price of CCC, S is the number of free samples handed out during the previous week, Pop is the regional population in thousands, P_S is the average price of salty snacks sold near the CCC display, and P_C is the average price of other sodas in the market.

The area population is 400,000 people, the average price of nearby salty snacks is $2.12, and the average price charged for other sodas in the market is $1.84.  Your boss has told you to hire a few marketing interns to travel the area set up Coyote Cola booths and hand out approximately 3500 free samples per week.

Weekly costs include $75,000 in fixed costs, $.85 for each unit produced, and an average of $.80 for each sample handed out (includes the cost of samples, travel, and stipends for the interns).  Your boss wants to make sure Coyote Cola sells LOTS of CCC and has advised that the bottled beverage sell for $1.00 per bottle to undercut the prices of competitors.

Calculate the quantity demanded, total revenue, total cost (both as a function and an amount), profit and own price elasticity of demand.  Do you agree with your boss?  Why or why not?

Give your recommendation for price and calculate quantity demanded, total revenue, total cost, profit and own price elasticity of demand (your recommendation should NOT be a random guess-you can solve for it).  Based on your recommendation, also provide the cross-price elasticity of demand for P_S and P_C.

Answer rating: 100% (QA)

DATE P0 2676 40000 Po t 3ro Pop 2460 Pe 43 coPc 06S Pop 400 Ps 212 184 S 3500 2676 40000 Po 0635... View the full answer