Question 1 University of Professional Studies, Accra (UPSA) was founded in 1965 as a private professional business education tuition provider. In 1999, by means of the Institute of Professional Studies Act, (Act 566), it became a tertiary institution with the mandate to provide tertiary and professional education in Accountancy, Management and related disciplines. The, school has a student population of approximately 12,000. The school now have a state-of-the- art Students' Center where food, snacks and drinks are served to students and staff. Nevertheless, a sizeable number of UPSA students patronize Auntie Ama's (ATM) rice and beans food located at Madina Estate close to the Home Made restaurant. In a quest to be able to predict the packs of rice Auntie Ama can sell in a month, she employed an economist to estimate the demand curve for her food. By sampling a total of 28 consumers, the economist estimated the demand function for Auntie Ama's food as (with Standard Errors in Parenthesis): Q9 = -175 - 1.5Px + 2.25Py + 0.51 + 0.75A (16.76) (0.53) (1.98) (0.12) (0.45) F-statistics = 56.9 Prob > 0.0000 R-squared = 0.8751 No. of Obs. = 28 Where Q& is the demand for Auntie Ama's food, Px is the price per pack of Auntie Ama's food, Py is the price per pack of Home Made food, I is per capita income of UPSA community, and A is the amount of money spent on advertising by Auntie Ama. In addition, the economist also estimated the supply function for Auntie Ama's food as: Q& = -25 + 3.5Px - 1.75PL + 0.25Tx Where Of is the supply for Auntie Ama's food, Px is the price per pack of Auntie Ama's food, PL is the average price of unskilled labor ( per hour), and Ty is the level of technology. Now suppose the equilibrium values of the variables in the demand and supply functions are given as: Px = $18; Py = $20;1 = $400; A = $20; PL = $10; Tx = 30 a) Identify the significant and insignificant variables at 5% significant level using to.025,26 = 2. 056 5 marks b) Interpret the coefficient of the significant variables. 1 mark c) Determine the quantity of packs of food sold. 1 mark d) Estimate the own price elasticity of demand and state the type of demand curve 1 marks e) Comment on the pricing policy options 1 mark f) Assess the probable impact on your firm if consumers income increase by 8%. 2 marks g) Find the demand and supply curves for Auntie Ama's food. 2 mark h) Determine the equilibrium price and quantity for Botch Potato and show the equilibrium graphically. 6 marks i) Examine the welfares of the economic agents. 2 marks
