Question: Pizza Z recently decided to raise its regular price on the large pizza from $9 TO $12 following the increase in the cost of labor and raw materials. unfortunately its sales dropped sharply from 8100 to 4500 pizzas per month. In and effort to regain its losses, the company ran a coupon promotion featuring $5 off caused a modest increase in the company's promotion costs by $2400 per month. in the period prior to expiration, coupons were used 40% of all purchases and monthly sales rose to 7500 pizzas.

Required:

Question 1: Calculate the arc elasticity implied by the initial response to Z- best's price increase.

Question 2: Calculate the effective price reduction resulting from the coupon promotion.

Question 3: In light of this price reduction, and assuming no charge in the price elasticity of demand, calculate z- best's arc advertising elasticity

Question 4: Why might the true advertising elasticity differ from that calculated in part(C)