Question

In: Economics

Suppose that for international students the annual cost of a full time Bachelor of Commerce (BComm)...

Suppose that for international students the annual cost of a full time Bachelor of Commerce (BComm) degree from Monash University is $45,000 and the equivalent degree at The University of Melbourne is $43,000. Also, suppose that at these prices there are 800 international students studying a BComm at Monash University and 900 international students studying a BComm at The University of Melbourne.

A. If Monash University lowers the cost of its annual Bachelor of Commerce course for international students to $40,000, what would the corresponding change in the quantity demanded of the course at The University of Melbourne need to be such that the two goods have a cross price elasticity of 1.2? Show your workings. Round your answer to the nearest whole number. [3 marks]

B. Given the cross-price elasticity is 1.2, if there is a 10% increase, for international students, in the price of the BComm course at Monash University, what will happen to international student demand for the BComm course at The University of Melbourne? Be specific in your answer, i.e. demand will … by … %. Show your workings. What does this tell us about the two goods? [1 mark]

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Expert Solution

Rahul Sunny answered 1 year ago
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