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Solve clearly 1.Consider the DorfmanSteiner model that relates the advertising cost to market power. Given the demand function: o(P,A)=P-1/2A1/4 (i) Show that the price elasticity

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Solve clearly

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1.Consider the DorfmanSteiner model that relates the advertising cost to market power. Given the demand function: o(P,A)=P-1/2A1/4 (i) Show that the price elasticity of demand is np=1/2. (ii) Show that the advertising elasticity of demand \"Fl/4- (iii) What will be the advertising to sales ratio in this industry? (iv) Does it depend on how costly it is to advertise for this product

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