Suppose a firm has the following demand equation:

Q = 1,000 - 3,000P + 10A where Q = quantity demanded P = product price (in dollars)

A = advertising expenditure (in dollars)

Assume for the following questions that P = $3 and A = $2,000.

a. Suppose the firm dropped the price to $2.50. Would this be beneficial? Explain.

Illustrate your answer with the use of a demand schedule and demand curve.

b. Suppose the firm raised the price to $4.00 while increasing its advertising expenditure by

$100. Would this be beneficial? Explain. Illustrate your answer with the use of a demand schedule and a demand curve. (Hint: First construct the schedule and the curve assuming A = $2,000. Then construct the new schedule and curve assuming A = $2,100.)