Calculating price and advertising elasticity values

General Cereals is using a regression model to estimate the demand for Tweetie Sweeties, a whistle-shaped, sugar-coated breakfast cereal for children. The following (multiplicative exponential) demand function is being used:

QD = 6,280P-2.15A1.05N3.70
where
QP=quantity demanded in 10 oz. boxes
P =price per box in dollars
A =advertising expenditures on daytime television, in dollars
N =proportion of the population under 12 years old

a. Determine the point price elasticity of demand for Tweetie Sweeties.
b. Determine the advertising elasticity of demand.
c. What interpretation would you give to the exponent of N?

Solution Preview

a. Determine the point price elasticity of demand for Tweetie Sweeties.

QD= 6,280*P^(-2.15)*A^1.05*N^3.70

Differentiate with respect to P, we get
dQD/dP=-2.25*6280*P^(-2.15-1)*A^1.05*N^3.70
=-2.25*6280*P^(-2.15) ...

Solution Summary

Solution depicts the steps to calculate the price elasticity and advertising elasticity of demand in the given case.

Suppose the own priceelasticity of demand for good X is -3, its income elasticity is 1, its advertisingelasticity is 2, and the cross-priceelasticity of demand between it and good Y is -4. Determine how much the consumption of this good will change if:
Instructions: Enter your answers as percentages. Include a minus (-) si

Suppose you have the following hypothetical demand or sales function.
Qx= -4Px+2Py+0.20I+0.04A
and
PX = $200, (price of good X)
PY =$230, (price of good Y)
I = $1,500 (disposable per capita income)
A =$12,000 (advertizing expenditures)
1. Calculate the income elasticity of demand for product X when I= $1,500. How c

Suppose Qd = 10,000-2Px+3Py-4.5M,
where Px = $100, Py = $50, and M = $2,000.
What is the own-priceelasticity of demand?
A. -2.34
B. -0.78
C. -0.21
D. -1.21

The demand schedule for the product 'xyz' is given below:
Price($) Quantity demanded
3 20
4 15
5 11
6 9
7 7
Task: Based on the above data, solve the questions given below:
Compute the point priceelasticity of demand for an increase in the p

The demand function for Newton's Donuts has been estimated as follows:
Qx = -14 - 54Px + 45Py + 0.62Ax
where Qx represents thousands of donuts; Px is the price per donut; Py is the average price per donut of other brands of donuts; and Ax represents thousands of dollars spent on advertising Newton's Donuts. The current

Text Problem:
Aztec Enterprises depends heavily on advertising to sell its products. Management at Aztec is allowed to spend $2 million monthly on advertising, but no more than this amount. Each month, Aztec spends exactly $2 million on advertising. What is Aztec's elasticity of demand for advertising? Can you write the equ

A regression model is being used to estimate demand for a type of candy. The following multiplicative exponential demand function is being used;
Qd = 6280P^-2.15 A^1.05 N^3.70
^ = raising to a power
Qd = Qty demanded of candy
P = price of candy per piece
A = Advertising expenditure
N = Population of children under th

In Qx = 3-0.5 in Px - 2.5 In Py + lnM + 2lnA
ln being natural log
Where
Px = $10
Py = $4
M = $20,000
A - $250
a) Determine the own priceelasticity of demandand state whether demand is elastic, inelastic or unitary elastic
b) Determine the cross priceelasticity of demand between good X and good Y and state wheth