Annual demand and supply for the Electronic firm is given by:
QD = 5,000 + 0.5 I + 0.2 A - 100P, and
QS = -5000 + 100P
Where, Q is the quantity per year, P is price, I is income per household, and A is advertising expenditure.

a. If A = $10,000 and I = $25,000, what is the demand curve?
b. Given the demand curve in part a., what is equilibrium price and quantity?
c. If consumer incomes increase to $30,000, what will be the impact on equilibrium price and quantity?

Solution Preview

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This posting provides a thorough, step by step analysis illustrating how to solve for this equilibrium price problem. All required work is provided, along with a Word attachment with the required graphing.

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