BUSI 620 MENTOR Learn Do Live /busi620mentor.com BUSI 620 MENTOR Learn Do Live /busi620mentor.com | Page 9

0.1 what can you say about the relationship between each set of commodities 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?