General Cereals is using a regression model to estimate the demand for Tweetie Sweeties, a whistle-shaped, sugar coated breakfast cereal for children. The following (multiplicative exponential) demand function is being used:
QD = 6,280P-2.15A1.05N3.70
Where QD = quantity demanded in 10 oz boxes
P = price per box, in dollars
A = advertising expenditures on daytime television in dollars
N = proportion of the population under 12 years old
a. Determine the point price elasticity of demand for Tweetie Sweeties. -2.15
b. Determine the advertising elasticity of demand. 1.05
c. What interpretation would you give to the exponent of N? Increase in 1% in population of 12 year old will increase the demand of the general cereal's product by 3.70%.