A computer hardware company has estimated that demand for its good is represented by the following mathematical equation:, where P_X is the price of X, I represents the income of the consumer, P_Y is the price of the most closely related good, Qx is the quantity demanded of X, A_N represents advertising on newspapers and A_O represents online advertising.
$Q _ { X } = 5000 - 10 P _ { X } - 0 P _ { Y } + 2 I + 4 A _ { N } + 8 A _ { O }$ (i)What does the 0 coefficient in front of P_Y mean?
(ii)Ignoring the costs, which of the two advertising methods is more effective?
(iii)If we assume that P_Y=100, I=10, A_N=100, A_O=50 and the firm prices its good at $20, what is the quantity demanded? What changes if P_Y increases to 500?

Question

A computer hardware company has estimated that demand for its good is represented by the following mathematical equation:, where P_X is the price of X, I represents the income of the consumer, P_Y is the price of the most closely related good, Qx is the quantity demanded of X, A_N represents advertising on newspapers and A_O represents online advertising.

Q _ { X } = 5000 - 10 P _ { X } - 0 P _ { Y } + 2 I + 4 A _ { N } + 8 A _ { O }

(i)What does the 0 coefficient in front of P_Y mean?
(ii)Ignoring the costs, which of the two advertising methods is more effective?
(iii)If we assume that P_Y=100, I=10, A_N=100, A_O=50 and the firm prices its good at $20, what is the quantity demanded? What changes if P_Y increases to 500?

Quizplus · Accepted Answer

The Answer of A computer hardware company has estimated that demand for its good is represented by the following mathematical equation:, where P_X is the price of X, I represents the income of the consumer, P_Y is the price of the most closely related good, Qx is the quantity demanded of X, A_N represents advertising on newspapers and A_O represents online advertising. $$Q _ { X } = 5000 - 10 P _ { X } - 0 P _ { Y } + 2 I + 4 A _ { N } + 8 A _ { O }$$ (i)What does the 0 coefficient in front of P_Y mean? (ii)Ignoring the costs, which of the two advertising methods is more effective? (iii)If we assume that P_Y=100, I=10, A_N=100, A_O=50 and the firm prices its good at $20, what is the quantity demanded? What changes if P_Y increases to 500?

A Computer Hardware Company Has Estimated That Demand for Its QX=5000−10PX−0PY+2I+4AN+8AOQ _ { X } = 5000 - 10 P _ { X } - 0 P _ { Y } + 2 I + 4 A _ { N } + 8 A _ { O }QX​=5000−10PX​−0PY​+2I+4AN​+8AO​

A Computer Hardware Company Has Estimated That Demand for Its $Q _ { X } = 5000 - 10 P _ { X } - 0 P _ { Y } + 2 I + 4 A _ { N } + 8 A _ { O }$