Annual 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?

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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