A coffee retailer (Bob’s) developed the following daily demand curve for coffee for Your Town, NY.
Q = 500 - 300(P) + 200(Pc) + 0.01(M)
Where P is the price of Bob’s coffee, Pc is the price of Starbuck’s, and M is income in Your Town. Currently Bob’s and Starbuck’s Coffee are priced at $2.00 per cup, and YourTown income is $60,000.
What is Bob’s current daily sales? (Show your work)
What happens to Bob’s sales if he increases price to $3.00? (Show your work)
Assuming Bob’s price remains $2.00 but Starbucks price is now $1.00, how will this impact Bob’s daily sales? (Show your work)
With an improving economy Your Town incomes improve to $70,000, all else equal (Both Bob and Starbuck charge $2.00 per cup). How will this impact Bob’s coffee sales. (Show your work)