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Explain the Assumptions of the Consumer Demand Model
Four key marketing decision variables are price (P), advertising (A), transportation (T), and product quality (Q). Consumer demand (D) is influenced by these variables. The simplest model for describing demand in terms of these variables is:
D = k - pP + aA + tT + qQ
where k, p, a, t, and q are constants. Discuss the assumptions of this model. Specifically, how does each variable affect demand? How do the variables influence each other? What limitations might this model have? How can it be improved?
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