Answer to Question #318021 in Microeconomics for Sadaf Kazmi

Question

Nestle Frozen Yogurt shops have enjoyed rapid growth in Karachi in recent years. From the analysis of Nestle various outlets, it was found that the demand curve follows this pattern.

         Q= 200 – 100P + 120i + 32T -250 Ac + 400 AN

Where

Q= Number of cups served per week

 P= Average price paid for each cup

 i= Per capita income in the given market (thousands)

 T= Average outdoor temperature

 Ac= Competition’s monthly advertising expenditures (thousands)

AN = Nestle own monthly advertising expenditure (thousands)

Answer 1

One of the outlets has the following conditions;

P = 1.50, I= 10, T= 30 Ac = 15, An =10

a) Estimate the number of cups served per week by this outlet also determine the outlets demand curve.

$Q= 200-100P+120i+32T-250Ac+400An$

$Q= 200-100(1.5)+120(10)+32(30)-250(15)+400(10)$

$Q= 2460$ cups per week.

Also determine the outlets demand curve

$Q= 200-100P+120i+32T-250Ac+400An$

$Q= 200-100(P)+120(10)+32(30)-250(15)+400(10)$

$Q= 200-100(P)+1200+960-3750+4000$

$Q= 2610-100P$