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April 24, 2014

April 24, 2014

Posted by **Michelle Lawson** on Wednesday, July 27, 2011 at 11:22am.

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?

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