Problem: Given the following demand function:
Q = 2.0 P-1.33 Y2.0 A0.50
Where
Q = quantity demanded (thousands of units)
P = price ($/unit)
Y = disposable income per capita ($ thousand)
A = advertising expenditures ($ thousand)
Determine the following when P = $2/unit, Y = $8 (i.e., $8000), and A = $25 (i.e., $25,000)
(1) Price elasticity of demand
(2) The approximate percentage increase in demand if disposable income percentage increases by 3%.
(3) The approximate percentage increase in demand if advertising expenditures are increased by 5 percent.