1. The demand for beef in Springania was estimated with the following function using 30 observations. Q = ap₁bP₂P 3d Ic where Q is the per capita consumption of beef per year P₁ is the price per pound of beef P2 is the price per pound of pork P3 is the price per pound of chicken I is the per capita income in thousands of dollars per year. he estimated coefficients are provided in the table below. Coefficient Estimated Value Standard Error of Estimate a b с d e Equation 0.024 -0.5 0.07 0.01 0.054 0.02 0.014 0.58 0.029 1.15 a) Is demand for beef elastic or inelastic? Explain. b) What range of the own-price elasticity will give a 95% probability that the actual value is included in the estimate? c) Is beef a normal good? Explain. d) What is the 68% confidence interval for the cross-price elasticity of beef with respect to the price of chicken? e) Assume that Springania has only one other product in the economy that was not included in the above equation. What is the cross-price elasticity of beef with respect to the price of this other product? Explain.
1. The demand for beef in Springania was estimated with the following function using 30 observations. Q = ap₁bP₂P 3d Ic where Q is the per capita consumption of beef per year P₁ is the price per pound of beef P2 is the price per pound of pork P3 is the price per pound of chicken I is the per capita income in thousands of dollars per year. he estimated coefficients are provided in the table below. Coefficient Estimated Value Standard Error of Estimate a b с d e Equation 0.024 -0.5 0.07 0.01 0.054 0.02 0.014 0.58 0.029 1.15 a) Is demand for beef elastic or inelastic? Explain. b) What range of the own-price elasticity will give a 95% probability that the actual value is included in the estimate? c) Is beef a normal good? Explain. d) What is the 68% confidence interval for the cross-price elasticity of beef with respect to the price of chicken? e) Assume that Springania has only one other product in the economy that was not included in the above equation. What is the cross-price elasticity of beef with respect to the price of this other product? Explain.
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Chapter4: Estimating Demand
Section: Chapter Questions
Problem 7E
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