A firm has estimated the following demand function for its product: Q=100-5P+51 +15 A Where Q...

 

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A firm has estimated the following demand function for its product: Q=100-5P+51 +15 A Where Q is quantity demanded per month in thousands, P is product price, I is an index of consumer income, and A is advertising expenditures per month in thousands. Assume that P = $200, 1=150, and A = 30. For simplicity in calculating the results, use the point elasticity formulas to complete the calculations indicated below. (i) Calculate quantity demanded. (ii) Calculate the price elasticity for demand. Is demand elastic, inelastic, or unit elastic? (iii) Calculate the income elasticity of demand. Is the good normal or inferior? (iv) Calculate the advertising elasticity of demand. (v) Plot the demand curve. (vi) Plot the new demand curve that would result from increasing income to 200 and decreasing advertising to 20. (vii) Calculate the new price elasticity of demand at the same price as in (ii). Explain why the result is different from part (ii). A firm has estimated the following demand function for its product: Q=100-5P+51 +15 A Where Q is quantity demanded per month in thousands, P is product price, I is an index of consumer income, and A is advertising expenditures per month in thousands. Assume that P = $200, 1=150, and A = 30. For simplicity in calculating the results, use the point elasticity formulas to complete the calculations indicated below. (i) Calculate quantity demanded. (ii) Calculate the price elasticity for demand. Is demand elastic, inelastic, or unit elastic? (iii) Calculate the income elasticity of demand. Is the good normal or inferior? (iv) Calculate the advertising elasticity of demand. (v) Plot the demand curve. (vi) Plot the new demand curve that would result from increasing income to 200 and decreasing advertising to 20. (vii) Calculate the new price elasticity of demand at the same price as in (ii). Explain why the result is different from part (ii).