In: Economics
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: