Relationship between the products of jjulie and aj

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JJULIE Corp estimates its demand function is as follows: = 400 - 12.5 + 25 + 14 + 10 ∗ where Q is the quantity demanded per month, P is the product's price (in $), A is the firm's advertising expenditure per month, Y is income per month, and P* is the price of AJ Corp.

a) If JJULIE's current price is $60 and it spends $10 per month on advertising, while income is $25 and AJ's price is $70, calculate the price elasticity of demand with the price change.

b) Calculate the cross price elasticity and discuss about the relationship between the products of JJULIE and AJ.

c) Calculate the income elasticity and discuss the figure.

d) With price elasticity calculated in a) and JJULIE expect to increase the price by 12% what effect will this have on the firm's revenue and why? (draw graph and explain).

e) If you want to increase the quantity demand by 5%, how much should you spend on advertising?

Reference no: EM132647753

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