Answer to Question #98013 in Microeconomics for Michael Owusu-Asumeng

Question #98013
the arc advertising elasticity is 1.5 as advertising expenditure increases from $10 to $12 million. if demand is 50 at an advertising expenditure of $12 million, what will be the demang at an advertising expenditure of $10 million?
1
Expert's answer
2019-11-07T10:03:07-0500
"Arc Ed = [(Qd_2 \u2013 Qd1) \/ (Qd_1 + Qd_2) \/ 2 ] \u00f7 [(P_2 \u2013 P_1) \/ (P_1 + P_2) \/ 2]"







"Arc Ed = [(Qd_2 \u2013 Qd_1) \/ (Qd_1 + Qd_2) \/ 2 ] \u00f7 [(P_2 \u2013 P_1) \/ (P_1 + P_2) \/ 2]"

"1.5 = [(50 \u2013 Qd_1) \/ (Qd_1 + 50) \/ 2 ] \u00f7 [(12\u2013 10) \/ (12 + 10) \/ 2]"

"0.27= 2(50 \u2013 Qd_1) \/ (Qd_1 + 50)"

"Qd_1=38.1"


if expenditure of $10 million, demand is 38.10

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Comments

MICHAEL OWUSU-ASUMENG
07.11.19, 18:44

Thanks my answer is confirmed. So what will the interpretation?

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