Question Details

The approximate percentage increase in demand if 



1.	The following demand function has been estimated for Fantasy pinball machines:

          QD = 3,500  40P + 17.5Px + 670U + .0090A + 6,500N

where	P = monthly rental price of Fantasy pinball machines
	Px = monthly rental price of Old Chicago pinball machines (their largest competitor)
	U = current unemployment rate in the 10 largest metropolitan areas
	A = advertising expenditures for Fantasy pinball machines
	N = fraction of the U.S. population between ages 10 and 30

(a)	What is the point price elasticity of demand for Fantasy pinball machines when P = $150, Px = $100, U = .12, A = $200,000 and N = .35?
(b)	What is the point cross elasticity of demand with respect to Old Chicago pinball machines for the values of the independent variables given in part (a)?


2.	Given the following demand function:
          Q = 2.0 P1.33 Y2.0 A.50

where	Q = quantity demanded (thousands of units)
	P = price ($/unit)
	Y = disposable income per capita ($ thousands)
	A = advertising expenditures ($ thousands)

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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