# Demand function

Given the following demand function:

Q = 2.0 P-1.33 Y2.0 A0.50

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 approximate percentage increase in demand if disposable income percentage increases by 3%.

(c) The approximate percentage increase in demand if advertising expenditures are increased by 5 percent.

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#### Solution Preview

I will assume that your demand function looks like this (if not contact me)

Q = 2(P^1.33)(Y^2)(A^0.5)

first we plug in Y = 8 and A = 25

Q = 640(P^1.33)

dQ/dP = ...

$2.19