ECO Problem - Price elasticity of demand
Question # 00008620
Posted By:
Updated on: 02/18/2014 05:02 AM Due on: 02/18/2014
Given the following demand function:
Q = 2.0 P-1.33 Y2.0 A0.66
Where: Q = quantity demanded (thousands of units)
P = price ($/unit)
Y = disposable income per capita ($ thousand)
A = advertising expenditures ($ thousand)
Determine the following when P = $2/unit, Y = $8 (i.e., $8000), and A = $25 (i.e., $25,000)
a. Price elasticity of demand ?
b. The percentage increase in demand if disposable income percentage increases by 3%. ?
c. The percentage increase in demand if advertising expenditures are increased by 5 percent. ?
-
Rating:
/5
Solution: ECO Problem - Price elasticity of demand