MULTIPLICATIVE DEMAND EQUATION

Given the following demand function:

Q = 2.0 P
1.25
Y
1.5
A
0.5


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 2%.
(c) The approximate percentage increase in demand if
advertising expenditures are increased by 3 percent.