Mal-Cable TV has estimated the demand for its service to be given by the following function: Q = 9.83+ 1.2P + 2.5A + 1.6Y -1.4Py where Q = monthly sales in units P = price of the service in RM A = promotional expenditure in RM'000 Y = average income of the market in RM'000 Py = price of 'home movies' in RM The current price of is RM60, promotional expenditure is RM120,000, average income is RM28,000, and the price of 'home movies' is RM45. Total operating overheads is RM 255,000. The profit margin of the business is at 30%. Required :

a. The current sales of the company is RM1,250,000, If Mal-Cable TV increase their price by 10%, what will happen to the demand volume ?. (5 marks)

b. If the average income in the society increased by 5%, what will happen to the volume of demand for Mal-cable TV services in the market ? (5 marks)

c. What will happen to the projected operating profit (loss) of the company with the 10% increased in price?. (5 marks)

Answer rating: 100% (QA)

a To determine the effect of a 10 increase in price on the demand volume we need to calculate the new demand volume using the given demand function Gi... View the full answer