4. The following demand function has been estimated for Fantasy Pinball machines:

Q_D = 3,500 - 40P + 17.5P_x + 670U + 9A + 6,500N

Where P = monthly rental price of Fantasy Pinball machines

P_x = monthly rental price of Old Chicago pinball machines (a competitor)

U = current unemployment rate in the 10 largest metropolitan areas

A = advertising expenditures for Fantasy Pinball machines in thousands of dollars

N = fraction of the US population between 10 and 30

a) What is the point elasticity of demand with respect to Fantasy Pinball machines when P = $150, P_x= $100, U=0.12, A = $200,000 and N = .35?

b) What is the point cross elasticity of demand with respect to Old Chicago pinball machines for the values of the variables in part (a)?

c) A rumor is circulating in the industry that Old Chicago has excess inventory and is planning a 20% discount for new and existing customers. How should Fantasy respond if the news is verified?