Ql = 3,536 - 0.5Pl + 0.2Pc + 0.008I + 0.0001A Ql= the number of Paradise Lakes l

Question

Ql = 3,536 - 0.5Pl + 0.2Pc + 0.008I + 0.0001A

Ql= the number of Paradise Lakes lots purchased per year Pl= the price of a Paradise Lakes lot Pc= the price of a competing land companys lots I=average annual household income A=the annual amount spent by Paradise Lake on advertising

8. How will demand for Paradise Lake’s lots change in response to a $10000 decrease in your advertising budget (give the numerical value of it, too)?

9. How will demand for Paradise Lake’s lots change in response to a $1000 increase in the price of competing lots (give the numerical value of it, too)?

10. How will the demand for Paradise Lake lots change in response to a $10000 increase in income (give the numerical value of it, too)?

Explanation / Answer

The demand function is

Ql = 3,536 - 0.5Pl + 0.2Pc + 0.008I + 0.0001A

Now if advertising budget decreases bt $10000, with other thing be constant the demand for Paradise Lake’s lots decreases by 1unit. Just multiply 10000 with 0.0001.

Now if the price of competing lots increases by $1000, with other things be constant the demand for Paradise Lake’s lots increases by 200 units.

Now if  income increases by $10000, then with other things be constant, the demand for Paradise Lake lots increases by 80 units.

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