Answer to Question #70462 in Microeconomics for Ariba

Question #70462
The Creative Publishing Company (CPC) is a coupon book publisher with markets in several southeastern states. CPC coupon books are either sold directly to the public, sold through religious and other charitable organizations, or given away as promotional items. Operating experience during the past year suggests the following demand function for CPC’s coupon books: Q = 5,000 – 4,000P + 0.02Pop + 0.5I + 1.5A Where: Q is quantity, P is price ($), Pop is population, I is disposable income per household ($), and A is advertising expenditures ($). A. Determine the demand faced by CPC in a typical market in which P = $10, Pop = 1,000,000 persons, I = $30,000, and A = $10,000. B. Calculate the level of demand if CPC increases annual advertising expenditures from $10,000 to $15,000. C. Calculate the demand curves faced by CPC in parts A and B.
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Expert's answer
2017-10-09T15:08:07-0400
A. Q = 5,000 – 4,000P + 0.02Pop + 0.5I + 1.5A
So, quantity of demand is:
Q = 5,000 – 4,000*10 + 0.02*1,000,000 + 0.5*30,000+1.5*10,000 = 15,000 (coupon books)
B. Q = 5,000 – 4,000*10 + 0.02*1,000,000 + 0.5*30,000+1.5*15,000 = 22,500 (coupon books)
C. Demand curves are:
Q1 = 5,000 – 4,000*P + 0.02*1,000,000 + 0.5*30,000+1.5*10,000 = 190,000 – 4,000P
Q2 = 5,000 – 4,000*P + 0.02*1,000,000 + 0.5*30,000+1.5*15,000 = 197,500 – 4,000P

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