Let's examine the history of LSUS undergraduate enrollment vs. its tuition and fees. Download the "A3Q1 LSUS enrollment data" Excel file; in it you will see historical information on LSUS undergraduate enrollment, total credit hour production, and (12-hour) tuition and fees. (If you wish, you can verify or look up additional information here, here, and here.)

Calculate annual elasticities for both types of quantity variables (i.e., you will have an elasticity of price vs. headcount, and one of price vs. credit hour). You will get an error message in your calculations when the tuition doesn't change (like in 1991-1992 and 1994-1996), since the elasticity calculation will be trying to divide by zero; just delete those error values in your Excel table so that the cells are blank. The first headcount elasticity will be calculated based on the 1989 and 1990 values of tuition and headcount and should be about -1.113; the first credit hour elasticity will also be based on the 1989 and 1990 values and should be about -3.217). Calculate the average annual elasticity for headcount (from 1989-2019), and the average annual elasticity for credit hour (from 1989-2019).

Many administrators argue that, to increase revenue to LSUS to cover budget shortfalls, tuition should be raised. Comment on this suggestion, using the evidence you've uncovered.

2.Copy and paste the following data into Excel:

P Q

$210.00 6650

$203.70 6848

$195.30 7163

$193.20 7567

$191.10 7764

$180.60 8043

$170.10 8316

$153.30 8548

a.Run OLS to determine the demand function as P = f(Q); how much confidence do you have in this estimated equation? Use algebra to invert the demand function to Q = f(P).

b.Using calculus to determine dQ/dP, construct a column which calculates the point-price elasticity for each (P,Q) combination.

c.What is the point price elasticity of demand when P=$210.00? What is the point price elasticity of demand when P=$185.50?

d.To maximize total revenue, what would you recommend if the company was currently charging P=$203.70? If it was charging P=$185.50?

e.Use your first demand function to determine an equation for TR and MR as a function of Q, and create a graph of P and MR on the vertical and Q on the horizontal axis.

f.What is the total-revenue maximizing price and quantity, and how much revenue is earned there? (Round your price to the nearest cent, your quantity to the nearest whole unit, and your TR to the nearest dollar.) Compare that to the TR when P = $210.00 and P = $185.50.