Sara firm is a manufacturer of cosmetic products. Its management is currently engaged in an analysis of the lipsticks produced by the firm, examining the future demand for them. Market research indicates that advertising expenditure, price and average income are three major variables affecting the demand for the lipsticks. The advertising elasticity for demand is estimated to be 1.5, the price elasticity =1.2 and the income elasticity = 1.8. In addition, the following data are available:

Year Sales Advertising Expenditure Price Income

2018 2,369 21,000 6.5 25,000

2019 21,000 6.5 27,000

2020 24,000 6.8 29,000

1.Estimate sales for 2019 and 2020.

2.DuetoCoronacrisis,acompetitorplansonreducingitspricefrom $6.90 to $6.40 in 2020; how much would Sara firm has to spend on advertising to achieve the same rate of growth of sales as from 2018 to 2019?