Problem 3 : Starting with the estimated demand function for Chevrolets given in Problem 2 , assume that the average value of the independent variables changes to N = 225 million , I = 12,000 , PF = 10,000 , PG = 100 cents , A = 250,000 and PI = 0 .
a ) Find the equation of the new demand curve for Chevrolets .
b ) Plot this new demand curve , D ’ C , and , on the same graph , plot the demand curve for Chevrolets , DC , found in Problem 2 ( d ).
Problem 7 : The total operating revenues of a public transportation authority are $ 100 million while its total operating costs are $ 120 million . The price of a ride is $ 1 , and the price elasticity of demand for public transportation has been estimated to be -0.4 . By law , the public transportation authority must take steps to eliminate its pricing deficit .
a ) What pricing policy should the transportation authorty adopt ? Why ? ( b )
b ) What price per ride must the public transportation authority charge to eliminate the deficit if it cannot reduce costs ?
Problem 9 : A researcher estimated that the price elasticity of demand for automobiles in the United States is -1.2 , while the income elasticity of demand is 3.0 . Next year , U . S . auto makers intent to increase the average price of automobiles by 5 percent , and they expect consumers ’ disposable income to rise by 3 percent .
a ) If sales of domestically produced automobiles do expect U . S auto makers to sell next year ?
b ) By how much should domestic auto makers increase sales by 5 percent next year ?