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1. A local rm estimates the weekiy inverse demand for its product is: p _ 500 Q + 5P,,,,,,, + 0.25.4 25 Where Q is

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1. A local rm estimates the weekiy inverse demand for its product is: p _ 500 Q + 5P,,,,,,, + 0.25.4 25 Where Q is its quantity demanded for widgets, Pam is the price of some other good, and A is the level of advertisement expenditures in dollars. a. Price Elasticity of Demand Derive the general formula for the price elasticity of demand as a function of price, price of the other good, and advertising expenditures. What is the price elasticity of demand if the price of the good is $5, the price of the other good is $7, and advertising expenditures are $50? ls demand elastic, unit elastic, or inelastic on this range of the demand curve? b. Cross-Price Elasticity of Demand III. Derive the general formula for the cross-price elasticity of demand as a function of price, price of the other good, and advertising expenditures. What is the crossprice elasticity of demand if the price of the good is $5, the price of the other good is $7, and advertising expenditures are $50? Are these two goods complements or substitutes? How does the cross-price elasticity of demand change as the price of the other good rises? (Hint: Use Calculus) c. Advertising Elasticity of Total Revenue Derive the advertising elasticity of total revenue (percent change in total revenue over percent change in advertisement expenditures) as a function of quantity, the price of the other good, and advertisement expenditures. What is the advertising elasticity of total revenue when advertisement is $50, quantity demanded is 150, and the price of the other good is $7

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