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?