Where ‘Advertising’ is the amount that is spent on advertising.
prince2014.slgAnnual demand is given by [in thousands].
Qd = 15 + 10 Advertising – 3 P (Where ‘Advertising’ is the amount that is spent on advertising.)
Calculate each the following:
a. What is the demand if P = 3 and Advertising = 2?
b. What happens if you lower the price to 2? Is this beneficial to the firm? Why?
c. What happens if you raise the price to 4 but also raise the Advertising to 2.1? Is this beneficial to the firm? Why?
d. What is the equilibrium if Qs = 11 + P and we spend 2 on Advertising?
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