The Firm estimates the demand for its service as follows:

Qd = 5 450 - 2 000 P - 0.1 Y + 100 Pa

where: Qd is the number of bus tickets demanded daily;

P is the price of a bus ticket;

Y is the average income of the population;

Pa is the cost of using alternative modes of transportation (automobile, mainly).

A) How should one interpret the sign (+ or -) in front of each coefficient in the demand equation?

B) Calculate the demand function using the values Y = $300 and Pa = $5.80 and draw the demand curve. Make sure to clearly identify the intersections with the axes.

C) What should be the price of a bus ticket, given that the company can only accommodate 4000 passenger trips daily, and that it aims for 100% occupancy rate? Show your calculations clearly.

(Note: The Firm provides a public service and does not aim to maximize profits. The pricing of bus tickets mainly helps regulate the flow of passengers.)

D) What will be the size of the shortage in passenger trips due to an increase of $2 in the cost of alternative modes of transportation?

E) How should the company adjust its pricing so that the quantity demanded equals its capacity? Provide a numerical answer.