Suggested Case Solution: a) The quantity demanded of coffee brand X per year (Q*,) increases by 0.8 millions of pounds for each $1 trillion increase in personal disposable income (I), by 2 million pounds for each-$1 increase in the price of competitive brand of coffee per pound (P,) and by 1.2 million pounds for every hundreds of thousands of dollars increase in advertising expenditure of coffee brand X. Q* declines by 0.6 million of pounds Jor each $ | increase in the price of sugar per pound and by 3 million of pounds for each $1 increase in the price of coffee brand x. To find tie value of Q%, we substitute the average value of the independent variables iato the estimated demand function. Thus for Px = $ 2,1= $2.5, Py=$ 1.80, Ps = $ 0.50, and A= $1, we obtain. b) 5-3 (2) + 0.8 (25) + 2 (1.8) — 0.6 (0.5) + 1.2 (1) Qt = 2 million pounds ¢) The firm can use the above information to find the elasticity of the demand for coffee brand X with respect (0 its price, income, the price of competitive coffee «brand Y, the price of sugar and advertising. Thus Exs =-0.6(0.50/2) =-0.15 Ex, =12(1/2) =06 The firm can then use these elasticities 10 forecast the demand for its brand of coffee next vear d) Using the given information and the results above, the firm can determine its sales next veai (Q",) as follows: QL = QQ. APL / PVE, # Gy (AI) E) # Q, (APY PY) Ex.y # Qs (APYP,) Exs > QA AES b6= 2 + 2(5%) (-3) + 2(4%) (1) + 2 (7%) (1.8) + 2 (-8%) (-0.15) + 202%) (0.6) * " 2 + 2 (0.05) (-3) + 2 (0.04) (1) + 2 (0.07) (1.8) + 2(-0.08) (0.15) + 2 (0.6). 2 (1-0.15 + 0.04 + 0.126 +0.012 + 0.072) 21 +.0.1) = 21) = 2.2 million pounds or 2,20,000 pounds \ The anchor Company could alsc usé. this information to determine that it could sell 2, million pounds of its brand of coffee next year (the same as this year) by increasing its price by 8.33% instead of by 5% (if everything else remained the same). The extra 3.32% increase in Py would result in 2(0.033) (-3) = 0.198, or 198,000 pounds less c:ffee sold than the 2.2 million pounds forecasted for next year with an increase in P.. of only 5%. VIL. Globalization St Businesses - International Convergence of Tastes & Preferences Examples: Coca Cola and Jeans of U.S Japanese Cars and VCRs French Perfumes Texas Instruments anc! Canon Calculators , Zenith and Hitachi Portable PCs and Xerox and Minolta copiers found rore or less everywhere in houses and offices across the Globe. vVY¥VV With the tremendous improvement in telecommunications, transportation and travel.~ the cross fertilization of cultures and convergence of tastes can only expected to accelerate in the future ~ with all its important implications for producers and sellers of an increasing number and types of products: