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Demand function for nazarene university services

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Reference no: EM133083723

Suppose you estimated the following linear demand function for Nazarene University's services/products

Where Qd = annual demand for university services (in thousands of units); P = average annual price of university services (in US$); Pc = average annual price of competing university services (in US$) Y = average annual income for users of university services (in in hundreds of dollars) while A = annual advertising expenditures (in hundreds of dollars).

Required:

  1. Interpret the coefficients of the estimated demand equation
  2. Assume that P = $180; Pc = $150; Y = $700 and A = $250, determine and interpret the:
  3. Price elasticity of demand for university services
  4. From your answer in (i) above, what do you think will be the effect on university revenue, of lowering the price of university services from the current $130? Support your answer
  5. Cross-price elasticity of demand

Identify and explain TWO determinants of price elasticity of demand for university services  

Reference no: EM133083723

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