The cross-price elasticity of demand for private universities with respect to the average price of public universities

Question:

The cross-price elasticity of demand for private universities with respect to the average price of public universities is closest to:

A. 0.3 .

B. 3.1.

C. 3.9.

The market demand function for four-year private universities is given by the equation:

\[ Q_{p r}^{d}=84-3.1 P_{p r}+0.8 I+0.9 P_{p u} \]

where Qprd is the number of applicants to private universities per year in thousands, Ppr is the average price of private universities (in thousands of USD), I is the household monthly income (in thousands of USD), and Ppu is the average price of public (government-supported) universities (in thousands of USD). Assume that Ppr is equal to 38,I is equal to 100 , and Ppu is equal to 18.

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Economics For Investment Decision Makers

ISBN: 9781118111963

1st Edition

Authors: Sandeep Singh, Christopher D Piros, Jerald E Pinto

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