FQ Corp estimates that its demand function is as follows:

Q = 480 - 12P + 20A + 15Y + 8P*

where Q is the quantity demanded per month, P is the product's price (in ), A is the firm's advertising expenditures (in 1000 per month), Y is per capita disposable income (in 1000), and P* is the price of FS Corp.

1. During the next three years, per capita disposable income is expected to increase by 4,000 and FS is expected to increase its price by 5. Estimate the effect this will this have on FQ's sales volume, stating any necessary assumptions.

2. If FQ wants to change its advertising by enough to offset the above effects, by how much must it do so?

3. If FQ's current price is 50 and it spends 10,000 per month on promotion, while per capita income is 15,000 and FS's price is 60, calculate the promotional elasticity of demand at the end of three years with the advertising change.

4. Compare the profitability of maintaining sales volume by either changing price or changing advertising spending.