Mal-Cable TV has estimated the demand for its service to be given by the following function:

Q = 9.83+ 1.2P + 2.5A + 1.6Y -1.4Py

where

Q = monthly sales in units

P = price of the service in RM

A = promotional expenditure in RM000

Y = average income of the market in RM000

Py = price of home movies in RM

The current price of is RM60, promotional expenditure is RM120,000, average income is RM28,000, and the price of home movies is RM45. Total operating overheads is RM 255,000. The profit margin of the business is at 30%.

Required :

a. The current sales of the company is RM1,250,000, If Mal-Cable TV increase their price by 10%, what will happen to the demand volume ?.

b. If the average income in the society increased by 5%, what will happen to the volume of demand for Mal-cable TV services in the market ?

c. What will happen to the projected operating profit (loss) of the company with the 10% increased in price?.