After a careful statistical analysis, the Chidester Company concludes the demand function for its product is Q = 500 - 3P + 2Pr + 0.1I where Q is the quantity demanded of its product, P is the price of its product, Pr is the price of its rival’s product, and I is per capita disposable income (in dollars). At present, P = $10, Pr = $20, and I = $6,000. What is the cross- price elasticity of demand between its product and its rival’s product? a. 0.0388 b. 0.0721 c. 0.0360 d. -0.0360

After a careful statistical analysis, the Chidester Company concludes the demand function for its product is Q = 500 - 3P + 2Pr + 0.1I where Q is the quantity demanded of its product, P is the price of its product, Pr is the price of its rival’s product, and I is per capita disposable income (in dollars). At present, P = $10, Pr = $20, and I = $6,000. What is the cross- price elasticity of demand between its product and its rival’s product? a. 0.0388 b. 0.0721 c. 0.0360 d. -0.0360

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 6E

See similar textbooks

Similar questions

After a careful statistical analysis, the Chidester Company concludes the demand function for its product is Q = 500 - 3P + 2Pr + 0.1I where Q is the quantity demanded of its product, P is the price of its product, Pr is the price of its rival’s product, and I is per capita disposable income (in dollars). At present, P = $10, Pr = $20, and I = $6,000. What is the price elasticity of demand for the firm’s product? a. -0.0291 b. -0.027 c. -0541 d. -.270
After a careful statistical analysis, the Chidester Company concludes the demand function for its product is Q = 500 - 3P + 2Pr + 0.1I where Q is the quantity demanded of its product, P is the price of its product, Pr is the price of its rival’s product, and I is per capita disposable income (in dollars). At present, P = $10, Pr = $20, and I = $6,000. What is the income elasticity of demand for the fi rm’s product? a. -0.5405 b. 0.5405 c. 1.0811 d. 0.5825
After a careful statistical analysis, the Chidester Company concludes the demand function for its product is Q = 500 - 3P + 2Pr + 0.1I where Q is the quantity demanded of its product, P is the price of its product, Pr is the price of its rival’s product, and I is per capita disposable income (in dollars). At present, P = $10, Pr = $20, and I = $6,000. What is the implicit assumption regarding the population in the market?
After a careful statistical analysis, the Chidester Company concludes the demand function for its product is Q = 500 - 3P + 2Pr + 0.1I where Q is the quantity demanded of its product, P is the price of its product, Pr is the price of its rival’s product, and I is per capita disposable income (in dollars). At present, P = $10, Pr = $20, and I = $6,000. What is the current output level Q? a. 1030 b. 1100 c. 610 d. 1110
No written by hand solution 4.7 An estimate of the demand function for household furniture produced the following results: F=0.0036 Y1.35R0.19P(−0.37) r2=0.996 where F = furniture expenditures per household Y = disposable personal income per household R = value of private residential construction per household P = ratio of the furniture price index to the consumer price index The point price elasticity for household furniture is -0.37 or -1.95 or 1.35 or 7.11 and the income elasticity is -0.37 or -1.95 or 1.35 or 7.11 . According to the estimated model, a 10 percent increase in the value of private residential construction per household Increase or decrease the quantity demanded by 1.4 or 1.9 or 5.1 percent.
Manning Inc. is the leading manufacturer of garage doors. Demand for residential garage doors depends, of course, on the rate at which new houses are being built, which in turn depends on changes in income per capita. During the past year, Manning sold 10 000 garage doors at an average price of R1 500 per door. In the coming year, disposable income per capita is expected to increase from R32 000 to R34 000. Without any price change, Manning expects current-year sales to rise to 12 000 units. 1. Calculate the arc income elasticity of demand. 2. The company economist estimates that in conjunction with the change in income, if the price of doors is increased by R100, they could sell 11 500 doors. What is the arc price elasticity and what would be the company’s revenue? 3. Should they raise the price even more?
Using regression analysis on data from a field experiment, the demand curve for a product is estimated to be QXd = 1,200 − 3PX − 0.1PZ where Pz = $300. a. What is the own price elasticity of demand when Px = $140? Is demand elastic or inelastic at this price? b. What is the own price elasticity of demand when Px = $240? Is demand elastic or inelastic at this price? c. What is the cross-price elasticity of demand between good X and good Z when Px = $140?
The demand function for good X is ln Qdx= a + b ln Px + c ln M + e, where Px is the price of good X and M is income. Least squares regression reveals that â = 7.42, b ˆ = −2.18, and ĉ = 0.34. a. If M = 55,000 and Px = 4.39, compute the own price elasticity of demand based on these estimates. Determine whether demand is elastic or inelastic. b. If M = 55,000 and Px = 4.39, compute the income elasticity of demand based on these estimates. Determine whether X is a normal or inferior good.
Using regression analysis on data from a field experiment, the demand curve for a product is estimated to be QXd = 1,200 − 3PX − 0.1PZ where Pz = $300. What is the own price elasticity of demand when Px = $240? Is demand elastic or inelastic at this price? What would happen to the firm’s revenue if it decided to charge a price above $240? Enter your response rounded to one decimal place. Own price elasticity: Demand is: . If the firm prices above $240, revenue will:
The REDY Company produces a specialty cement used in the construction of roads. REDY is a price-setting firm and estimates the demand for its cement using a demand function in the linear form: Q = f( P, M, PR) where Qc = demand for cement/month (in yards) Pc = the price of cement per yard, M = country’s tax revenues per capita, and PR = the price of asphalt per yard. The manager of REDY obtained the following results in her attempt to estimate the demand for cement in the succeeding months. The results are presented below: DEPENDENT VARIABLE Qc R-    SQUARE       F-RATIO   P-VALUE ON F OBSERVATIONS 64             0.8093         84.872         0.0001 VARIABLE PARAMETER    ESTIMATE STANDARD ERROR      T-RATIO P-VALUE INTERCEPT      8.20       4.01   2.04       0.0461 PC    -3.54         1.64 -2.16 0.0357 M…
The ATV Company produces a specialty cement used in the construction of roads. ATV is a price-setting firm and estimates the demand for its cement using a demand function in the linear form: Q = f (P, M, PR) where Qc = demand for cement/month (in yards) Pc = the price of cement per yard, M = country’s tax revenues per capita, and PR = the price of asphalt per yard. The manager of ATV obtained the following results in her attempt to estimate the demand for cement in the succeeding months. The results are presented below: DEPENDENT VARIABLE Qc R-    SQUARE       F-RATIO   P-VALUE ON F OBSERVATIONS 64             0.8093         84.872         0.0001 VARIABLE PARAMETER    ESTIMATE STANDARD ERROR      T-RATIO P-VALUE INTERCEPT            8.20               4.01    2.04        0.0461 PC    -3.54…
The ATV Company produces a specialty cement used in the construction of roads. ATV is a price-setting firm and estimates the demand for its cement using a demand function in the linear form: Q = f (P, M, PR) where Qc = demand for cement/month (in yards) Pc = the price of cement per yard, M = country’s tax revenues per capita, and PR = the price of asphalt per yard. The manager of ATV obtained the following results in her attempt to estimate the demand for cement in the succeeding months. The results are presented below: DEPENDENT VARIABLE Qc R-    SQUARE       F-RATIO   P-VALUE ON F OBSERVATIONS 64             0.8093         84.872         0.0001 VARIABLE PARAMETER    ESTIMATE STANDARD ERROR      T-RATIO P-VALUE INTERCEPT            8.20               4.01    2.04        0.0461 PC    -3.54…