QUESTION 1 A. Explain the concept of elasticity and show why it is critical in managerial economic decision making. (10 marks) B. The demand for Bachanal Cruise Line holiday cruise tickets, based on annual data, has been estimated as follows: Q = 12,000 - 8.4P + 0.25Y where Q is the number of tickets sold, P = price and Y =Income. If P = $1,350 and Y = $18,000 i. Compute the point price elasticity of demand and interpret your result. (8 marks) ii. Find the point income elasticity of demand and interpret your result. (7 marks) C. The demand function for a monopolist firm is: Q = 8,600 - 20P. Its total cost is made of total fixed cost of 5,000 and total variable cost TVC = 130Q + 010Q i. Find the Price function. (3 marks) ii. Compute the profit maximizing quantity of the firm. (5 marks) iii. Find the corresponding price of the product. (3 marks) iv. Compute the level of profits at the profit maximizing level of output. (4 marks) QUESTION 3 The following is the estimated demand for visiting the Antigua and Barbuda Museum. (Standard errors in Parentheses). Q = 8.4- 2.5P + 2.0P, + 41 (3.0) (0.5) (1.1) (1.6) n = 40; R' = 0.91; Level of significance = 5% Where, Q: The number of persons visiting the Antigua & Barbuda Museum; P: Entrance price of museum visits Ps: Entrance price of alternative visit to Betty's Hope Windmill historical site I: Visitors income (in thousands of dollars) A. Interpret the estimated coefficients (8 marks) B. Interpret whether each estimated coefficient, including the intercept, is statistically significant. Hence state which explanatory variables have any real effects on demand for visits to the Antigua and Barbuda Museum. (12 marks) C. Determine the goodness of fit of the regression equation and evaluate your results