A travel company has hired a management consulting company to analyze demand in twenty-six regional markets for
Question:
Q = 1,500 - 4P+ 5A+ 10/ + 3PX
Where
Q = amount of the product demanded P= price of the product in dollars
A = advertising expenditures in thousands of dollars
I = income in thousands of dollars
PX = price of some other travel products offered by a competing travel company
a. Calculate the amount demanded for this product using the following data:
P = $400
A = $20,000
I = $15,000
PX = $500
b. Suppose the competitor reduced the price of its travel product to $400 to match the price of this firm's product. How much would this firm have to increase its advertising in order to counteract the drop in its competitor's price? Would it be worth it for them to do so? Explain.
c. What other variables might be important in helping estimate the demand for this travel product?
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Related Book For
Managerial Economics
ISBN: 978-0133020267
7th edition
Authors: Paul Keat, Philip K Young, Steve Erfle
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