Question: MK Corp estimates that its demand function is as follows: Q = 400 - 12.5P+ 25A + 14Y + 10P* Where Q is the quantity

MK Corp estimates that its demand function is as follows:

Q = 400 - 12.5P+ 25A + 14Y + 10P*

Where Q is the quantity demanded per month, P is the product's price (in $), A is the firm's advertising expenditure (in $'000 per month), Y is per capita disposable income (in $'000), and P * is the price of AJ Corp.

a. During the next five years, per capita disposable income is expected to increase by $5,000 and AJ is expected to increase its price by $12. What effect will this have on the firm's sales volume?

b. If MK wants to change its price by enough to offset the above effects, by how much must it do so?

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