1) Given the following estimated demand function: Qx = 200 ? 17Px + 14Ps ? 20Pc ?0.1Y
(where Qx represents quantity demanded; Px represents price of the main product; Ps represents
price of the substitute; Pc represents price of the complement and Y represents income)
a) Interpret the value of each coefficient in the estimated demand function.
b) If there is a $2.52 increase in Ps, what impact it would have on Qx?
c) Given: Px = $10; Ps = $20; Pc = $25 and Y = $2,000. What is the coefficient for the marginal
2) The intercept of a compressed demand function is 75,000 and the coefficient of a marginal
revenue curve is ?0.8. Calculate the following:
a) marginal revenue curve;
b) demand function;
c) demand curve;
d) revenue maximising quantity
e) revenue maximising price.
3) Given the following:
The intercept of the demand function is 100,000 and the intercept for the marginal revenue is
a) Determine the price and quantity that will maximize revenue.
b) What is the price elasticity at a price of $12,500?
c) If the marginal cost is $20,000; what is the profit maximizing price?