Answer to Question #73697 in Microeconomics for Zulfiqar

Question

The arc advertising elasticity is 1.5 as advertising expenditures of Rs. 12 Lakhs, what will demand be at an advertising expenditure of Rs. 10 lakhs?

Answer 1

A / PQ = - (Ea / Ep), where Ea / Ep = 1.5 and PQ changes from 12 to 10, that`s why A will be A = 10 * 1.5 = 15, but firstly it will be A =18, when advertising expenditures of Rs. 12 Lakhs. So demand will be 18