Suppose a firm has the following demand equation: Q(P) = 1,100 - 3,100P + 10.50A Where Q(P) = quantity demanded at the market price P P = product price (in $) A = advertising spending (in $) Assume for the following questions that initial values of P = $3.00 and A = $2,000

(5 Points) (A) Suppose the firm dropped the price to $2.60. Would this be beneficial. Explain. (Hint: investigating the link between revenue and price elasticity of demand is the best approach -for this question.)

(5 Points) (B) Supposed the firm raised the price to $4.00 while increasing its advertising expenditure by $100. Would this be beneficial? REQUIRED (for 2B): - Construct the demand schedules (in a table) of Q, P and A (before and after the increase in advertising spending) -using Excel (detailed steps are optional) - Graph the demand curves (before and after the increasing in advertising spending) -using Excel (details of steps are optional)