Question

(b) A company has the following:
demand equation Q = 1000 – 3000 P + 10 A
Q = Quantity demanded, P = Product Price, A = Advertisement expenditure
Assume that P = 3 and A = 2000
Suppose the firm drops the price to Rs. 2.50 would this be beneficial. Suppose the firm raises the price to Rs.
4.00 while increasing its advertisement expenditure by 100 would this be beneficial? Explain​

Answer 1

Answer:

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Answer 2

Answer:

Suppose a firm has the following demand equation:

Q = 1,000 - 3,000P + 10A,

where Q = quantity demanded

P = product price (in dollars)

A = advertising expenditures (in dollars)

Assume for the questions below that P = $3 and A = $2,000

1. Suppose the firm dropped the price to $2.50. Would this be beneficial? Explain. Illustrate your answer with the use of a demand schedule.

2. Suppose the firm raised the price to $4.00 while increasing the advertising expenditures by $100. Would this be beneficial? Explain. Illustrate your answer with the demand schedule.

Problem 2

A