1.One of the leading TV producers has estimated the following demand equation after analyzing 36 regional markets:

Q = + 25,000 - 50P + 25A + 20Ac- 40Pc + 120 I

(12000)(22.2)(12)(8.5)(52)(55)

R²⁼ 0.82F = 32.26

The variables and their assumed values are

Q = Quantity

P = Price of the basic Model = 600 (dollars)

A = Advertising Expenditures = 100 (thousand dollars)

= Average price of the competitor's product = 700 (dollars)

= competitor's advertising expenditures = 80 (thousand dollars)

I = per capita income = 50 (thousand dollars)

a.Compute the elasticities for each variable. On this basis, discuss the relative impact that each variable has on the demand. What implications do these results have for the firm's marketing, pricing, and production policies?

b.What would be the effect of a 6 unit increase in the competitor's advertising expenditures?