(Answered) Calculate the price elasticity of demand for einsteinu2019s

Economics

The demand function for Einstein Bagels has been estimated as follows:

Qx = -15.87 %u2013 40.73Px + 84.17Py + 0.55Ax
where Qx represents thousands of bagels; Px is the price per bagel; Py is the average price per bagel of other brands of bagels; and Ax represents thousands of dollars spent advertising Einstein Bagels. The current values of the independent variables are Ax=216, Px=0.85, and Py=0.79.

a. Calculate the price elasticity of demand for Einstein%u2019s Bagels and explain what it means.

b. Derive an expression for the (inverse) demand curve for Einsteins%u2019s Bagels.

c. If the cost of producing Einstein%u2019s Bagels is constant at $0.10 per bagel, should they reduce price and thereafter, sell more bagels (assume profit maximization is the company%u2019s goal)?

d. Should Einstein Bagels spend more on advertising?

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