Assume you are the manager of Wenstrom Brewing Company (WBC) andyou face the following demand for your beer: QWBC = 12 - 3PWBC +4PPBR. Suppose you sell your beer for $3.00 per bottle and PBRsells for $1.50 per bottle.
a. Is PBR a substitute or a complement? Explain. b. Calculatethe cross-price elasticity of demand between WBC and PBR at thegiven prices. c. If you want to increase the level of beer you sellby 15%, how much should you change the price? Is this a good idea?Explain. d. Does your answer to part c change if the price of WBCwere $2.50 per bottle? Explain. e. If advertising was included inthe demand equation and the advertising elasticity was calculatedto be 2, how much would consumption of your beer change if youincreased the level of advertising by 4%?
