ECO Problem - Price elasticity of demand

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Given the following demand function:
Q = 2.0 P-1.33 Y2.0 A0.66

Where: Q = quantity demanded (thousands of units)
P = price ($/unit)
Y = disposable income per capita ($ thousand)
A = advertising expenditures ($ thousand)

Determine the following when P = $2/unit, Y = $8 (i.e., $8000), and A = $25 (i.e., $25,000)

a. Price elasticity of demand ?
b. The percentage increase in demand if disposable income percentage increases by 3%. ?
c. The percentage increase in demand if advertising expenditures are increased by 5 percent. ?

    • 12 years ago
    ECO Problem - Price elasticity of demand
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