Question

In: Economics

Annual demand for an Electronic company is given by the following equation: Q = 5000 +...

Annual demand for an Electronic company is given by the following equation:
Q = 5000 + 0.5 Y + 0.2 A - 100P
where Q is the quantity demanded per year, P is price, Y is income per household, and A is advertising expenditure.
Currently, Y = $25000, A = $10000, and P= 100.


1.8. If this company wants to increase the current demand for its products by 15%, by how much should it increase its advertising expenditure? (1 point)
1.9. If consumer incomes increase to $35,000, find the new demand curve? (1 point)
10. Represent graphically demand curves found in 1.2. and 1.8? (1 point)

Solutions

Expert Solution

The demand function is:

Q = 5000 + 0.5 Y + 0.2 A - 100P

Where,

Y = $25000

A = $10000

P= 100

The current demand Q = 5000 + 0.5*25000 + 0.2*10000 - 100*100

Q = 5000 + 12500 + 2000 - 10000

Q = 9500

1.8

The current demand need to be 15% higfher , that means Q = 1.15*9500 = 10925

The required advertisement expenditure = 10000 + x

Q = 5000 + 0.5 Y + 0.2 A - 100P

10925 = 5000 + 0.5*25000 + 0.2*(10000 +x) - 100*100

10925 = 5000 + 12500 + 2000 + 0.2x -10000

10925 = 9500 + 0.2x

0.2x = 10925 - 9500

0.2x = 1425

x = 7125

Hence, the advertisement expenditure should increase by $7125

1.9

When New Y = $35000

The new demand curve = Q = 5000 + 0.5 Y + 0.2 A - 100P

Q = 5000 + 0.5*35000 + 0.2A -100P

Q = 5000 + 17500 + 0.2A - 100P

Q = 22500 + 0.2A - 100P

The sub-part 1.2 is not provided in the question. Assume it might indicate the old demand (Q_Old)

The demand curve as per 1.2 and 1.8 is:

Rahul Sunny answered 8 months ago
Next > < Previous

Related Solutions

Assume that a demand equation is given by q=5000−100p Find the marginal revenue for the production...
Assume that a demand equation is given by q=5000−100p Find the marginal revenue for the production level (value of q) 1000 units b. The cost of producing q units is given by C(q)=3000−20q+0.03q2 Find the marginal profit for production level 500 units
Given the demand equation and MC in problem # 1 (demand equation: Q = 40 –...
Given the demand equation and MC in problem # 1 (demand equation: Q = 40 – 0.5P. Marginal cost is MC = $20.), suppose the firm decides to offer quantity discount by selling the product in bundles of 10 units. Answer the following questions. A graph would help you with this question, but you do not need to include the graph in your answer. a. What is the maximum price that the firm can charge for the first 10 units,...
The annual demand for liquor in a certain state is given by the following equation: QD...
The annual demand for liquor in a certain state is given by the following equation: QD = 500,000 – 20,000P where P is the price per gallon and QD is the quantity of gallons demanded per year. The supply of liquor is given by the equation: QS = 30,000P a.) Solve for the equilibrium annual quantity and price of liquor. Suppose that a $1.00- per-gallon tax is levied on the price of liquor received by sellers. Use both graphic and...
A person's demand is given by the following equation: log(Q)=40-10log(P). What is the elasticity of demand...
A person's demand is given by the following equation: log(Q)=40-10log(P). What is the elasticity of demand when P=100?
The demand equation for a market is given by p(q + 3) = 15 and, for...
The demand equation for a market is given by p(q + 3) = 15 and, for some constant α, the supply equation is q = αp − 1 where p is the price and q is the quantity. Given that the equilibrium price for this market is three, determine the equilibrium quantity and the value of α. Find the consumer and producer surpluses?
Suppose the domestic demand for coffee is given by the equation Q = 100 - P,...
Suppose the domestic demand for coffee is given by the equation Q = 100 - P, domestic supply by the equation Q = P. The world price for coffee is $20 per unit. The government decides to impose an import quota limiting imports to 10 units. How much deadweight loss will this generate? Please explain clearly using graphs.
An oligopoly market's monthly demand is given by the equation: Q = 3,840 – 0.8 P....
An oligopoly market's monthly demand is given by the equation: Q = 3,840 – 0.8 P. In creating a cartel, the four oligopolists agree to the following market shares: Firm a: 35%, Firm b: 20%, Firm c: 30%, and Firm d: 15%. They also agree to charge the same price. Their respective Total Costs functions are: Firm a T.C. = 600,000 + 0.75 Q2 Firm b T.C. = 300,000 + 0.75 Q2 Firm c T.C. = 500,000+ 0.75 Q2 Firm...
Fort Collins daily demand for gasoline in gallons is given by the equation Q = 200,000...
Fort Collins daily demand for gasoline in gallons is given by the equation Q = 200,000 – 10,000P or equivalently P = 20 – Q/10,000. The marginal private cost of producing a gallon of gasoline is $2. Meanwhile, the marginal external cost of consuming a gallon of gasoline is also $2, because combusting gasoline increases traffic congestion, wears down public roads, and contributes to climate change. a. Draw a figure of Fort Collins’ consumers daily demand for gasoline, the marginal...
The market demand for gym memberships in North Florida is given by the equation Q D...
The market demand for gym memberships in North Florida is given by the equation Q D N = 1000 − 20 p, and the market demand for gym memberships in South Florida is given by the equation Q D S = 1200 − 40 p. Price is measured as the monthly membership fee and quantity is measured as memberships per month. In this problem assume North Florida and South Florida are separate and independent markets. (a) Suppose the membership fee...
1.) Firm has monopoly power. Its demand equation is given by P(q) = 10 –q. Its...
1.) Firm has monopoly power. Its demand equation is given by P(q) = 10 –q. Its total cost of producing its output is given by the function TC(q) = (q2/8) + q+ 16, and it can be shown that its marginal cost equation is MC(q) = (q/4) + 1.1. Profit maximization a.Write down the firm’s marginal revenue equation, which expresses MR as a function of the firm’s output q. b.Calculate the firm’s profit-maximizing output q*. c.Calculate the price the firm...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT