2) Domingo Corp estimates that its demand function is as follows: Q = 400 - 12.5P + 25A + 14Y + 10P*(Off, inberprice) where Q is the quantity demanded per month, P is the product's price (in K), A is the firm's advertising expenditure (in K'000 per month), Y is per capita disposable CUMP income (in K'000), and P* is the price of Domingo Corp. REQUIRED A) During the next five years, per capita disposable income is expected to increase by K5,000 and JMP Enterprise is expected to increase its price by K12. What effect will this have on the firm's sales volume? [4 Marks] B) If Domingo wants to change its price by enough to offset the above effects, by how much must it do so? [2 Marks] C) If Domingo's current price is K60 and it spends K10,000 per month on advertising, while per capita income is K25,000 and Domingo's price is K70, GIMP calculate the price elasticity of demand with the price change. [2 Marks] D) What can be said about the relationship between the products of Domingo Corp and JMP Enterprise? [2 Marks] [Total: 25 Marks] END OF EXAMINATION Page 6 of 6